It is not uncommon for retired people to find themselves in need of a mortgage solution. We see this a lot at Think Plutus, so we have decided to write a guide that should answer many of the questions we often hear from older people about mortgages.
If you are exploring your options and wondering whether a mortgage as an older borrower is viable, read on. If you still have questions, contact Think Plutus and one of our advisers will be happy to give you some answers and help you find the right mortgage solution.
We are whole-of-market mortgage experts and always take your personal circumstances into consideration. With our help, you will find the very best deal available to you. Get in touch today to arrange a free, no-obligation consultation.
Can older people get a mortgage?
In a word: yes! There are many specialist mortgage providers who offer flexible deals aimed at pensioners. Many of these products don’t include the prohibitive age restrictions that you see from many mainstream banks and building societies. Good news for prospective borrowers who are retired or approaching retirement.
What’s more, there are actually mortgage products that are tailor-made for elderly customers such as equity release schemes and lifetime mortgages. We cover both of these types of products in this guide.
How can a pensioner obtain a mortgage?
The process of getting a mortgage as an older person is not massively different from getting one at any other age. There are a few key things that a lender will want to check:
- Affordability: Is your retirement income sufficient to keep up with repayments?
- Deposit: How much are you able to put down for a deposit?
- Credit rating: Does your credit record make for good reading?
Before you start approaching high street lenders, we strongly urge you to get expert advice from Think Plutus. With our specialist knowledge and experience, you’ll put yourself in a stronger position and find the best deal that you are likely to qualify for. Mortgages for people who are retired is a niche area of the mortgage world so it’s important to get the right advice.
Contact Think Plutus today and take the first steps – it doesn’t cost anything to get started.
Are there maximum age restrictions?
There won’t necessarily be a maximum age when applying for mortgages for pensioners. However, there are many lenders who have age limits on their products to cap eligibility.
Most lenders cap their eligibility at 70. However, there are plenty of mortgage lenders who operate with a higher age limit up to 85. There are even a few who don’t impose an age limit at all if the circumstances are right.
What alternative options are there for the elderly?
If you are already a property owner, you are fortunate enough to have a number of other options available to you. These include:
- Remortgaging to release some of the money tied up in your home
- Taking out an equity release mortgage
- Retirement Interest-Only (RIO) mortgages
The closer you are to retirement, the more difficult it can be to get a mortgage. This is why we advise you to speak to Think Plutus for some specialist advice.
We can offer insights and guidance from a place of experience and expertise. What’s more, as we are whole-of-market brokers, we can search the full market to find the lender that is most likely to approve your application and offer favourable rates.
As we mentioned above, there are several ways you can release equity with specialist mortgages for pensioners in the UK. A remortgage can unlock a cash lump sum, that can be used to purchase another property or for various other applications.
Another option to consider includes:
With a home reversion plan, you sell all or part of your property for less than its market value and receive a tax-free lump sum, a regular income, or a combination of the two. Meanwhile, you get to remain in the home as a tenant but pay no rent.
This type of scheme has diminished in popularity because it involves giving up ownership of all or part of your home. This means that, under certain circumstances, you are at risk of losing it.
Equity release mortgages for older borrowers
Equity release is a product category in the modern market which should not be confused with releasing equity via a remortgage. There are various equity release schemes to explore:
This type of borrowing is available for people aged 55+. Essentially, you take money from your property and have the interest accumulate over time without needing to make monthly repayments. The beauty of this option is that it allows you to retain ownership of your property. You can go on living there until you either die or move into permanent residential care.
The loan to value available with this option increases with the age of the applicant. The older you are when you take out the mortgage, the less time there will be for the interest to accumulate, so the amount of the initial loan is higher.
There should always be a non-negative equity guarantee to ensure your loved ones don’t inherit a debt. You can learn more about lifetime mortgages in detail.
Retirement Interest-Only Mortgage (RIO)
A retirement interest-only mortgage involves taking out a loan secured against your home to release equity from your property. Similar to other interest-only mortgages, you are required to pay the interest on the loan each month, ensuring the overall balance of the loan stays the same.
The loan capital is usually repaid via the sale of your property when you die or move into permanent care. Any money left over once the loan is repaid will be inherited by your beneficiaries.
Part & Part Mortgages & hybrid equity release
Another type of mortgage product is a part-and-part mortgage. They are a cross between a repayment mortgage and an interest-only one – a compromise that combines the two.
Instead of repaying the full loan plus interest over a predetermined term, as with a standard repayment plan, you only repay the interest along with a portion of the mortgage each month. When you reach the end of the term, there will still be some capital left to repay on the property, but it won’t be the full amount of the original loan.
With a hybrid equity release mortgage you pay off the interest each month, so your mortgage balance stays the same, learn more about interest only lifetime mortgages.
This type of arrangement can be complex, so it’s important to speak to a mortgage adviser like Think Plutus before applying for anything. We can talk you through the advantages and disadvantages of different options in relation to your circumstances.
Contact us today for a free, no-obligation consultation with an experienced mortgage expert.
Eligibility for the types of mortgages for older adults
The question of eligibility for a retirement mortgage depends on what type of mortgage you want, the lender you apply with and a number of other factors.
If a repayment mortgage is your target, you should know that many lenders will view older borrowers as more high risk. The reason is that if you reach retirement age before the loan is fully repaid, your income level may go down and this could cause lenders to have doubts over whether you could keep up with your repayments.
Having said that, if you apply for a mortgage where a property you already own can serve as security – such as equity release – your income is less of a factor. This is because you are not required to make repayments.
What are retirement lenders looking for when they assess a mortgage application?
To ensure you meet the eligibility and affordability criteria to take out a retirement mortgage, the lender’s checks may involve assessing:
- The type of mortgage you are pursuing: Your application will be assessed differently depending on whether you apply for a traditional mortgage or an equity release scheme.
- Your health: The amount you can borrow, secured against your home, can be significantly affected by your health. Impaired or enhanced lifetime mortgages allow people with health conditions to release more equity.
- Your age: Younger applicants are likely to be unable to borrow as much money as older ones when it comes to certain retirement mortgage products (like equity release). However, if you are looking to get a repayment mortgage, being younger (and further from retirement) should work in your favour.
- Your income: If you are pursuing a repayment mortgage you will need to demonstrate to lenders that you will be able to afford mortgage repayments.
- The type of property: Lenders view standard construction properties as more desirable as they are simpler to resell in the event that they have to repossess.
- Your credit file: Lenders may judge your ability to keep up with repayments or interest payments more harshly if your credit history has issues.
How much can an older person borrow?
This depends primarily on the type of mortgage you wish to apply for.
If a standard repayment mortgage is in your sights, and you have not yet retired, you should find lenders willing to offer a 75% loan to value (LTV) ratio. Naturally, the amount you will be offered is dictated by the value of the property you are mortgaging, along with your personal factors like income and your credit file.
If you are looking to apply for a mortgage and have already retired, you might find that larger mortgage amounts are harder to come by. For retired applicants, some mortgage lenders will only offer a lower LTV of around 50%. The fact that you are no longer working makes you a higher risk applicant as a pension income is often more modest than a working salary. Lenders need to feel confident that you can keep up with mortgage repayments and most will not feel this confidence in a retired person.
How is income assessed by retirement mortgage lenders?
As stated, a lender needs to have confidence that the loan you are applying for is affordable based on your retirement income. Generally speaking, loans are capped at 4.5x income, though there are lenders that will consider loaning 5x. In some circumstances, they may even go as high as 6x.
When assessing your income, a lender may take your pension, benefits and savings into account. This will enable them to conclude whether they are confident you could keep up with your mortgage repayments throughout the term of the loan.
If you’d like to receive a quote for a UK retirement mortgage, or you have questions about how your income would be assessed, please don’t hesitate to contact Think Plutus for advice.
Can you get a mortgage on a retirement apartment?
Some lenders will offer the option of mortgaging an apartment in a retirement complex. You must always read the terms and conditions of the agreement with retirement house builders because some contain restrictions on when and to whom they can be sold.
If such restrictions are in place, you may find that the number of lenders willing to approve a mortgage decreases. It may be necessary to approach a more specialist lender.
For expert advice on applying for a mortgage as a pensioner for a non-standard property or retirement apartment, contact Think Plutus today.
What if your application is declined?
If you find your bank refuses to offer you a mortgage as an older borrower, we strongly recommend that you avoid hastily making multiple new enquiries. Every time you submit an application for credit, it can leave a footprint on your credit report, which lenders look at when assessing your mortgage application.
If you have recently been declined credit with multiple lenders, this can create the negative impression that you are desperate for money.
This is why, if you have had a mortgage application declined, we urge you to speak to an expert adviser at Think Plutus before making your next move. We specialise in mortgages for retired people as well as for people with issues like bad credit. We will know about the lenders that are more likely to approve your application and can liaise with those lenders on your behalf.
Contact an expert
It’s important to consider all your options when seeking to obtain a retirement mortgage. There may be other loan options that are more affordable or a better fit for your circumstances. Think Plutus has access to the full market of mortgage lenders and products and we specialise in finding mortgages for pensioners. We are confident that we can find the right lender and the best possible deal to help you achieve your objectives in retirement.
If you have any questions about what you’ve read in this guide, please feel free to contact Think Plutus and we’ll give you the answers you need. With our help, you’ll get an understanding of the best options for you, the amount you could borrow and the steps to achieve your goal.
For the best support and advice in obtaining mortgages for pensioners, Think Plutus.
Frequently Asked Questions
Let’s take a look at some of the questions our clients often ask to give you some key answers about retirement mortgage products:
Can retired police officers get a mortgage?
If you are a retired police officer, or one who would be retiring during the lending period of a mortgage, it is possible to secure a loan. There are actually specialist lenders who offer products that are designed for retired police officers.
The amount lenders will be willing to offer will depend on factors like the mortgage type, the property in question, your age and your income. Therefore, you may find it helpful to speak to an experienced mortgage broker with a record of finding lenders for older borrowers.
Can I get a mortgage as a retired teacher?
Yes, it’s certainly possible. Your personal circumstances and the lender you approach will be the key factors, as different providers have different criteria to assess your mortgage application.
For teachers who are currently employed but approaching retirement, some lenders will offer a 75% LTV. For teachers who are already retired, there are also some lenders who will offer a lower LTV.
Do lenders offer mortgage loans for retired military personnel?
There are mortgages for older military borrowers. When lenders assess your application, the usual affordability checks will be applied to determine whether you will be approved. This means looking at your pension income and calculating whether the repayments will be affordable.
Can I take out a joint mortgage with retired parents?
Some lenders impose age caps on their products and 75 is a common upper limit for applicants. For this reason, taking out a joint mortgage with your son, daughter or even a younger friend can be difficult. That said, it certainly isn’t impossible, and Think Plutus can help you find a specialist lender with less stringent age caps on their products.
If you take out a joint mortgage with your child, the property and outstanding debt would have to be transferred to a sole ownership mortgage when you die. You would need to ascertain that your child has the capacity to afford the mortgage alone before you commit to a joint mortgage.
Learn more: Joint Mortgage with Parents
Are there mortgage products available for older first-time buyers?
If you are an older first-time buyer, there are lenders who will consider your application. Some of them will have age limits for first-time buyer mortgages so we recommend that you speak to one of our expert advisers before you apply. We can tell you which lenders are more likely to accept and approve your application.
Are retirement only mortgage calculators a good way to work out how much I can borrow?
It is common for homeowners to use online mortgage calculator tools to get an idea of how much they might be able to borrow in retirement.
The problem is that these tools cannot give you a precise figure, since all lenders have different criteria to calculate the amount they are willing to lend. For example, some lenders are more lenient when it comes to assessing applications for retirement mortgages where the applicant has more exceptional circumstances like bad credit or a non-standard property.
To get an accurate figure of what you could borrow, speak to an adviser with specialist knowledge and experience in mortgages for older buyers.