Are you nearing retirement and wondering what the mortgage options are for homeowners over 60? 

Mortgages secured by borrowers aged 61 and above saw a notable surge, rising by 24% from £11.3bln in 2021 to reach £14bln in 2022.¹

Whether you are looking to fund home improvements, supplement retirement income, or embark on new adventures, understanding your mortgage options is the key to unlocking a more comfortable future.

As experts in retirement planning, our SovereignBoss team has reviewed numerous schemes and condensed the basic details into this easy-to-read guide.

Therefore:

How Has the Mortgage Market Review (MMR) Impacted Loans for Older Borrowers?

The Mortgage Market Review introduced regulatory changes in 2014 to ensure responsible lending practices in the UK mortgage market.² 

These changes have impacted older borrowers seeking mortgage financing by emphasising affordability assessments.

Lenders are required to carefully evaluate a borrower's ability to make repayments based on income, expenses, and future financial circumstances. 

As a result, older borrowers may face challenges in accessing traditional mortgage options, particularly if they have reduced income or limited repayment periods.

Are There Mortgages Available for Older Homeowners in the UK?

Yes, there are still mortgages available for older homeowners in the UK, often referred to as later-life mortgages. 

Lenders have recognised the unique needs of older borrowers and have developed mortgage options tailored to their circumstances. 

These options provide unique flexibility and address the challenges that may arise during retirement.

What Are the Mortgage Options for Homeowners Over 60?

There are numerous mortgage options for homeowners over 60, these include retirement interest-only mortgages, equity release plans, and retirement capital and interest mortgages.

A closer look at each of these options: 

Retirement Interest-Only Mortgages (RIO) 

Retirement interest-only mortgages allow homeowners to pay only the interest on the loan while retaining ownership of their property. 

The capital is repaid when the property is sold or upon the borrower's passing and is a suitable option for those with a reliable retirement income.

Equity Release: Lifetime Mortgages and Home Reversion Plans 

Equity release schemes enable homeowners to release equity from their property without making regular monthly repayments. 

With a lifetime mortgage the loan, including interest, is repaid when the property is sold, usually upon the homeowner's death or when they move into long-term care.

A home reversion plan, on the other hand, involves the homeowner selling all or part of their property to a provider at below market value while retaining the lifelong right to live there.

Upon the homeowner’s passing or relocation to long-term care, the home is sold and the provider receives their portion of the property sale proceeds as determined by the ownership arrangement. 

Retirement Capital and Interest Mortgages 

Retirement capital and interest mortgages operate similarly to traditional repayment mortgages. 

Borrowers make monthly payments towards both the capital and interest however, these mortgages often have extended repayment terms, considering the borrower's age and financial circumstances.

Which Mortgage Option Is Right for You?

Choosing the right mortgage option for you depends on your individual circumstances, financial goals, and preferences. 

It is imperative to evaluate your financial situation, including your income, expenses, and plans for the future. 

Consulting with a qualified financial advisor or mortgage specialist can provide valuable insights and help you determine the most suitable mortgage option for your needs.

Qualifying for a Mortgage Over 60

Qualifying for a mortgage over 60 follows similar principles as any mortgage application. 

Lenders assess factors such as your income, credit history, affordability, and the type of mortgage you choose. 

However, there are additional considerations for older borrowers, and specific mortgage options cater to their needs.

Can Age Affect Your Eligibility for Different Types of Mortgages?

Yes, age can impact your eligibility for certain mortgage options. 

Traditional repayment mortgages typically have upper age limits, making them less accessible for older borrowers. 

However, specialised mortgages, such as retirement interest-only mortgages and lifetime mortgages, are designed to accommodate homeowners over 60 - in some cases over 55.

The good news:

With equity release your age may be a benefit, as certain equity release plans allow you to potentially borrow more and pay less interest the older you are. 

How Does Your Health Condition Impact Your Eligibility?

Your health condition generally does not directly affect your eligibility for a mortgage. 

However, if you are considering an equity release product like a lifetime mortgage, some lenders may require a health assessment to determine the loan amount. 

Certain health and lifestyle conditions may positively affect the maximum borrowing amount.

Such is the case with an enhanced lifetime mortgage, which potentially allows you to borrow more at a lower interest rate.

How Does Pension Income Affect Your Eligibility?

Pension income can affect your eligibility in determining mortgage affordability when you are over 60. 

Lenders consider the stability and adequacy of your pension income when assessing your eligibility for certain plans.

A reliable pension income source enhances your chances of qualifying for some mortgages.

Can You Get a Mortgage Over 60 if You Are Self-Employed?

Yes, if you are self-employed you can still obtain a mortgage over 60. 

Lenders may require additional documentation to assess the stability and sustainability of your self-employed income. 

Providing tax returns, business accounts, and evidence of ongoing contracts or projects will help demonstrate your eligibility.

What Is the Process for Applying for a Mortgage Over 60?

The mortgage application process for those over 60 can vary depending on the mortgage type you are applying for. 

In most cases, it involves gathering necessary documentation, such as proof of income, bank statements, and identification, and completing a mortgage application. 

It is a good idea to seek assistance from a mortgage broker or financial advisor to navigate the process smoothly.

What Fees Should I Expect When Applying for a Mortgage Over 60?

When applying for a mortgage over 60, you can expect to encounter fees that are typical with a traditional mortgage. 

These can include: 

• Arrangement fees
• Valuation fees
• Legal fees
• Early repayment charges 

These fees vary depending on the lender and the specific mortgage product. 

Very important to remember:

Always review and ensure you understand the fee structure before committing to a mortgage.

Five Factors That Increase Your Chances of Qualifying for a Retirement Mortgage Over 60

There are five factors that can increase your chances of qualifying for a retirement mortgage over 60.

What you can do:

• Provide a stable and sufficient income, including pension income.
• Maintain a good credit history and a solid credit score.
• Stick with a realistic repayment plan, considering your financial circumstances.
• Have a thorough understanding of the mortgage options available to you.
• Seek professional advice from mortgage brokers or financial advisors to help navigate the process.

Common Questions

In Conclusion

Obtaining a mortgage over 60 is not necessarily more difficult, thanks to the availability of specialised mortgage options designed for older borrowers. 

Refinancing, joint mortgages, estate planning considerations, and credit improvement strategies all play important roles in navigating the mortgage process. 

By understanding your options and eligibility for a mortgage over 60, seeking expert advice, and considering your specific circumstances, you can make informed decisions and secure a mortgage that suits your needs.