Retirement Mortgage Plans For Older Borrowers

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Getting A Mortgage Over 60

If you’re considering taking out a mortgage, but you’re over the age of 60, don’t worry! You can still take out a mortgage! We’ll tell you everything you need to know about the loans you can choose from.

As some of you might know, older borrowers have had some more difficulty taking out a loan—especially those older than 60. However, in 2014, a problematic law for older borrowers was still running – the Mortgage Market Review (or the MMR). It caused many banks and societies to refuse to lend to existing borrowers if the term would go over 66 years.

Now:

The emphasis used to be on affordability, so possible borrowers’ income was assessed and their expenses. This meant that those older than 60 would have a small number to choose from.

And another thing…

Affordability and state pension and retirement laws limit older borrowers’ options—retirement laws like abolishing a compulsory retirement age.

However, many companies are now making a change for the better and benefit of older borrowers. Some providers will accept any form of income as a means to repay the mortgage: any form of pension, investments, etc.

So, let’s look at some of these:

Type of mortgageEquity release lifetime mortgageEquity release home reversionRIOResidential
DetailsThey are designed to convert accumulated equity into a regular income, drawdowns, or an initial lump-sum.A tax-free lump-sum or regular income in exchange for a section of the house/property below market value and repaid with the property sale.For older borrowers, the provider won’t require repayment until a specific life event.A standard mortgage product for the purchase of a new house or remortgage of a property.
Affordability checksNoNoYesYes
Age55+, no maximum65+55+, no maximumMin and max age set by the provider
Payment termsYou have fully repaid when you die, when the home sells or when you need permanent care.Not committed to regular mortgage payments for life, but compound interest applies.Option to pay all or some interest, or repay interest plus capital.Existing mortgage/secured loans on your house must be paid off.No repayments to make. Borrower stays in their home. Provider reclaims a part of the property when the house gets sold.The provider can’t sell the house until you die.The borrower gets less than the market value for the property, between 20-60%. It can be taken as a lump-sum or income.Ownership gets transferred to the home reversion provider for the portion that was sold.You fully paid if you die or need permanent care.Make monthly interest payments for lifePay interest on the loan every month.Risk of repossession for default on repayments.Max set by the providerCan choose to repay loan plus interest, interest-only or part & part.If it’s interest-only, a repayment vehicle should be in place.Risk of repossession for default on repayments.
Interest rateFixedN.A.Fixed & VariableFixed & Variable
Product switchingMostly not for switchingN.A.Can be switchedCan be switched
ProvidersSpecialist AdvisersSpecialist AdvisersGeneral Mortgage BrokersGeneral Mortgage Brokers
Is consumer advice necessary?Yes, the FCA’s rules require consumers to get advice.Yes, the FCA’s rules require consumers to get advice.Advised or non-advisedAdvised or non-advised
Monthly interest paymentCan pay some, all, or no monthly interest payments.No interest payable. It’s not a loan.Monthly interest payments to be made.Monthly repayments to be made: capital & repayment, interest-only or part & part.
Possible financial adviceIt could affect your inheritance. When it comes to an interest roll-up mortgage, the amount owed grows quickly.Usually seen as a last resort.Usually cheaper when compared to most lifetime mortgages out there, but you’ll have to pass the affordability checks.Providers want proof that you’ll be capable of repaying when interest rates increase. They can refuse you.

What Type Of Borrower Are You?

Are you looking for a later life or RIO mortgage? Or perhaps you’re unsure if later life mortgages are the best way forward. Here’s a great way to find out. Ask yourself the following questions: 

  1. Are you living in the house you want to retire in?
  2. Are you looking for a like-for-like remortgage, transferring your existing amount?
  3. Are you looking to buy your next home?
  4. Are you borrowing extra money to improve your home?
  5. Are you releasing money to help out your kids or grandkids with a lump-sum?
  6. Are you looking to get money for a significant personal gift?
  7. Do you want to free up some cash?

You’ll know better what type of loan or mortgage you need after answering these questions and discussing them with your financial adviser.

But what’s in it for you?

5 Pros of Our Later Life Mortgages

  1. Available to people aged 50 and older.
  2. There’s no max age limit.
  3. The max LTV is 75%.
  4. Up to 40-year term.
  5. Borrowing for: home renovations, second home purchase or gifts to children, etc.

Now, let’s answer your next question:

Can I get a mortgage at age 60?

The simple answer is yes, you can. However, you might get a shorter-term mortgage. You’ll need to prove that you’ll be able to repay your mortgage when you go into your retirement.

Let me tell you something…

It might be challenging to get a mortgage if you’re older or around 60 due to your income decrease as you retire. But, maybe you need a mortgage to remortgage, move house, or buy a home after separation or divorce.

Now:

The Mortgage Market Review

2014 was a year of note, as it brought forth a set of rules – the Mortgage Market Review. Meaning, lenders have to make sure borrowers can afford the mortgage. So, now it’s tough to get a mortgage over 60 years of age due to these rules.

But, wait, there’s more.

However, over the 60s can apply for mainstream, retirement interest-only, and equity release loans. So, all hope isn’t lost.

So, how do you get one?

How To Get A Loan If I’m Over 60

The most important thing is to ensure you can repay the mortgage before your lender’s age limit. This is the max-age you can be at the end of your mortgage term. For example, if your provider’s age limit is 70 and you’re 60 now, you’ll have ten years to repay the mortgage.

Simply put:

Every provider has a different age limit, so make sure you know what yours is. They might not even have an age limit.

Ask yourself:

When Will I Retire?

As with everything in life, people have different goals, lives, and circumstances. So, retirement happens at different ages. Generally, providers will have a max-age for the end of the mortgage term. Some have a rule that states you have to repay the mortgage by the stated/agreed-upon age or government retirement age, whichever comes first.

Better yet:

This rule accounts for each retirement plan. Some lenders won’t mind lending you money after you’ve already retired.

As mentioned before…

Providers will assess your affordability by looking at your retirement income if you’re already retired or close to retirement.

Once again, the income can be either:

  • a state pension
  • a workplace or private pension
  • investments
  • property
  • savings
  • a job

So, what are your options?

Mortgage Types If I’m Over 60

Recently, providers designed mortgages specifically for those over 60. There are retirement interest-only, equity release, which includes home reversion plans, and lifetime loans.

You might be wondering:

How Can I Improve My Chances of Getting a Mortgage Over 60?

Simply prove to your provider that you’ll be able to repay your mortgage. Make sure your credit score is exceptional. To qualify, you’ll have to:

  1. own your home completely (but you can use equity release to repay your mortgage)
  2. have enough equity in your property
  3. keep your home in a good condition

Which Lenders Help Over 60s?

Building societies are generally good with lending to the over 60s. Usually, it’s easier than going to a bank to get one. Many building societies also don’t have an age limit attached to the repayment. And, it’s essential to look at whether or not they’re a member of the ERC.

Now, let’s revise equity release for over 60s a bit.

They can be great for borrowing later in your life and boost your retirement income with tax-free cash. Because the age of U.K. citizens is on the rise, there’s been a greater demand for over 60s. According to ONS predictions, 25% of the U.K. population will be older than 65 by 2050.

Simply put…

Many retired people like to go on cruises and have luxurious holidays they’ve always dreamed of. With the increase in age comes the increased need for extra cash: and in this case, mortgages and equity release specifically. People generally have money locked up in their property by the time they retire.

What’re My Options?

If we look at traditional mortgages, the max-age limit used to be 65. The times they are changing. Modern times are known for earlier marriage, property price increases, and financial insecurity, to name a few.

Now:

The min age for equity release is 55. This is an excellent option if you want to help your kids, pay university fees or save money for your retirement. While traditional mortgages are more difficult to get as an over-60-year-old person, there’s no age limit with lifetime mortgages, so there’s an excellent option for you.

Once again…

Equity release providers and lenders all differ when it comes to rules. Some have shorter terms and higher monthly repayments than others. Some have loan products only for older people.

Simply put:

Lenders have increased their max-age limit, building societies leading the way. And, smaller building societies tend to take a personalised approach to borrowers, and they’re more willing to accept alternative incomes after you’ve retired.

Now:

For those older than 60, there are other means of accessing their funds: downsizing, being a good one, or equity release and remortgaging, as we’ve mentioned before already.

Let me tell you more.

What’s an Equity Release Mortgage Again?

Equity release is a type of remortgaging allowing homeowners over 55 to unlock equity from their homes as a tax-free lump-sum of cash. It’s a great aid in putting away money for retirement or to buy another home.

Simply put…

There are lifetime mortgages1 with a min age requirement of 55. This mortgage is repaid when the homeowner dies, needs medical care permanently or when the house gets sold. They have fixed interest rates, and you don’t have to make regular repayments. You can choose to repay the mortgage at the end of the term plus any rolled-up interest.

Let me tell you:

You need to look for lenders who are members of the ERC2 and who have a no-negative-equity guarantee. This will safeguard you against owing more than the value of your house if property prices drop.

Secondly, there are home reversion plans you could consider, with a min age requirement of 65. With these plans, you sell part of your property or the whole property at a lower rate than its market value. You’ll be able to continue living in your property rent-free, of course.

Better yet:

Your provider will repay your loan after you die and they’ve sold the house. However, it’s important to remember that by taking out money from your home, the value of your estate can be reduced and your entitlement to means-tested benefits as well.

Please seek professional help and equity release advice before doing anything.

Common Questions

Can You Get A Mortgage When You Are Over 60?
Can You Get A 30 Year Mortgage At 60 Years Old?
What's The Oldest You Can Get A Mortgage?
How Does Over 60s House-Buying Work?

In Conclusion

Even if you’re older than 60, you’re not exempt from taking out a mortgage! There are multiple options for you to choose from. After reading this article, you should have a clearer view of your potential.

Don’t hesitate to contact us with any further questions.

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