When you think of retirement, do you see the mortgage ‘window of opportunity’ closing down on you?
Well, for most types of mortgage, you could be right.
The question is, does this mean that you can no longer find a mortgage option in your golden years?
We have thought about the same thing, and let me tell you… There are potentially even better mortgages for your home that aren’t even available for younger folks.
Let’s take a look!
So What’s the Deal With Mortgages and Being Older Than 60?
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 societies1 to refuse to lend to existing borrowers if the term would go over 66 years.
The emphasis used to be on affordability, so possible borrowers’ income and expenses were assessed. This meant that those older than 60 might have fewer expenses, but limited income to successfully get a mortgage.
Compare These Mortgage Options for Over 60s
Affordability, state pension, and retirement laws limit options for older borrowers. Retirement laws usually tend to abolish a compulsory retirement age.
However, there are some fantastic options for you to explore!
|Type of Mortgage||Equity Release Lifetime Mortgage||Equity Release Home Reversion||RIO||Residential|
|Details||They 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 or 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.|
|Age||55+, Age max may vary from 85 to 100||65+||55+, no maximum||Min and max age set by the provider|
|Payment Terms||It’s fully repaid from the sale of your home when you die or when you need permanent care. You are not committed to regular mortgage payments for life, but compound interest applies. There is an option to pay all or some interest or repay interest plus capital. Existing mortgage or 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.||Fully paid if you die or need permanent care. Make monthly interest payments for life. Pay interest on the loan every month—the risk of repossession for default on repayments.||Can choose to repay loan plus interest, interest-only or part & part. If it’s interest-only, a repayment vehicle should be in place—the risk of repossession for default on repayments.|
|Interest Rate||Fixed||N.A.||Fixed & Variable||Fixed & Variable|
|Product Switching||Mostly not for switching||N.A.||Can be switched||Can be switched|
|Providers||Specialist advisers||Specialist advisers||General mortgage brokers||General 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-advised||Advised or non-advised|
|Monthly Interest Payment||Can 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 Advice||It 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 mortgage or RIO mortgage? Or are you just unsure if later life mortgages are the best way forward?
Ask Yourself These 7 Questions To Find Out!
- Am I living in the house I want to retire in?
- Am I looking for a like-for-like remortgage, transferring my existing amount?
- Am I looking to buy my next home?
- Am I borrowing extra money to improve your home?
- Am I releasing money to help out your kids or grandkids with a lump sum?
- Am I looking to get money for a significant personal gift?
- Do I want to free up some cash?
You’ll know better what type of loan or mortgage you need after sitting down to answer these questions and discussing them with your financial adviser.
Should I Care About The Mortgage Market Review?
Yes, 2014 was a year of note, as it brought forth a set of rules – the Mortgage Market Review or MMR. Lenders have to make now sure that borrowers can afford their mortgages, making it tough to get a mortgage when you’re over 60 years of age.
For example, if your provider’s age limit is 70 and you’re now 60, you’ll have 10 years to repay your mortgage.
The result of this Mortgage Market Review is that over 60s can now apply for mainstream retirement interest-only and equity release loans.
Let’s see how!
Landing a Loan If You’re Over 60
Every provider has a different age limit, making sure you’re aware of the various lenders’ services specific to you and your age group.
People retire at different ages because of individual circumstances, while many may not be able to. Generally, providers will have a maximum age for the end of the mortgage term. However, some have none at all!
Rules like those that state you have to repay the mortgage by a set, agreed-upon age or government retirement age may vary from one provider to the next. Some lenders won’t mind loaning you money after you’ve already retired.
Providers will assess your affordability by looking at your retirement income if you’re already retired or close to retirement to see if you qualify for a loan.
Here’s 6 entities considered as retirement income:
- A workplace or private pension
- A state pension2
- Having a job
These 5 factors will further increase your chance of getting a mortgage if you’re over 60
- Own your home completely (but you can use equity release to repay your mortgage).
- Have enough equity3 in your property, and its value is over £70,000.
- Keep your home in a good condition.
- Make sure your credit score4 is exceptional.
- Simply prove to your provider that you will be able to repay the mortgage.
After reading the 5 factors, discuss with your partner to see if you qualify for an over-60 mortgage. Even taking care of your home and investing it in earlier life may bring your property value up and release more equity for you.
Equity Release, Age & Mortgages
The minimum age criteria for equity release, where you gather funds against the value of your property, is 55. This is an excellent option if you want to help your children, pay university fees or save money for your retirement.
Equity release providers and lenders all differ when it comes to rules. Some have shorter terms and higher monthly repayments than others. Some may have loan products only for older people.
The maximum age for traditional mortgages used to be 65 and is more difficult to get for an over-60-year-old person. However, there’s often no age limit with lifetime mortgages, so there’s an excellent option for you.
Lenders have increased their maximum age limit, building societies leading the way. Smaller building societies tend to take a personalised approach to borrowers, and they’re more willing to accept alternative incomes after you’ve retired.
Let’s look at equity release and lifetime mortgage in more detail.
3 Key Facts For Equity Release & Lifetime Mortgages
Equity release is a type of remortgaging allowing homeowners over 55 to unlock equity in 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.
Firstly, there are lifetime mortgages with a min-age requirement of 55. This mortgage is repaid when the homeowner dies, needs residential 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.
Secondly, you need to look for lenders who are members of the Equity Release Council and have a ‘no negative equity guarantee’5. This will safeguard you against owing more than the value of your house if property prices drop.
Thirdly, 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.
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.
Got Questions? Check These First
What's the Oldest You Can Get a Mortgage?
What’s the age limit for getting a mortgage?
- Age from around 70 to 85.
- Age when the mortgage term ends, around 75 to 95.
How Does Over 60s House-Buying Work?
There’s an option called Home for Life Plan, a lifetime lease plan for those older than 60. This plan means that you can pay almost 60% less than the market price for your new home. You also won’t have to interest.
Can You Get a Mortgage When You're Over 60?
If you’re older than 60, you can get a shorter loan, but you’ll have to provide a pension or investment income. If you’re older than 70, it might be a little more complicated. If you’re a homeowner, you might be able to get a loan.
Can You Get a 30 Year Mortgage at 60 Years Old?
It’ll depend on your means. If you can repay it, you’ll get the loan. Thanks to the Equal Credit Opportunity Act won’t allow you to be shown away based on your age.
Retirement Is Not Nearly The End
Even if you’re older than 60, you’re not exempt from taking out a mortgage. As we explained, there are multiple options for you to choose from. After reading this article, we hope you have a clearer view of where you stand in obtaining a full-proof mortgage.
Does equity release sound like a great option for you? Learn more about what’s equity release and how it works.
Finally, you should speak to an independent financial adviser to determine the best mortgage option for you!