It’s a common misconception that you can’t get a mortgage if you’re a certain age or above. However, plenty of later-life mortgage options are available if you want to remortgage onto a better rate, release equity, or even gift a deposit to help a family member.
Understanding Later-Life Mortgages
A later-life mortgage refers to anyone borrowing into retirement age or when they’re already retired. In other words, the borrower will most likely be retired once the mortgage term ends.
Having a mortgage in retirement means a change of income source and lifestyle, which makes these types of mortgages different from standard homebuyer mortgages. Lenders take this into account when assessing later-life mortgage applications.
There are several different options available, including:
Standard mortgages
Repayment mortgages
A capital and interest repayment mortgage is the most common option among homeowners. Your monthly payments cover the interest and a portion of the loan you borrowed when you first took out the mortgage. It gives you and your lender the security that the loan will be repaid in full at the end of the mortgage term.
Many lenders have a maximum age cap of 75 for these types of mortgages, though a few will accept borrowers beyond this. It's best to check which options are available with a broker.
Interest-only mortgages
With an interest-only mortgage, you pay the interest accrued monthly, but the overall mortgage balance doesn't reduce. Many lenders offer these types of options for older borrowers.
It’s important to note that, as you’re only paying the interest, you will need to repay the full loan amount at the end of the mortgage term. Consequently, if you’re considering this type of product, it’s essential to have a repayment strategy in place. This could be selling the property, using investments, or your pension to pay off the amount owed.
Retirement interest-only mortgages (RIO)
The difference between an RIO and a standard interest-only mortgage is that this option is only available to older borrowers.
For RIO mortgages, the loan must be repaid in time with a significant life event rather than at the end of the mortgage term. This could include:
- The death of the last remaining borrower on the loan
- When the last remaining borrower goes into long-term care
- Selling the property
Fewer options are available for these products, as not all lenders offer them. Typically, you must be 55 years or older to access an RIO mortgage. Because the loan is only repaid upon a significant life event, there is no upper age limit for applicants.
Equity release mortgages
If you need to release equity from your home to fund home improvements or to help with general living costs, equity release mortgages can allow you to do so. These mortgages are specifically for older borrowers, and the loans are only repaid after you die or if you move into long-term care.
Equity release for older borrowers is a very complex form of mortgage offered by specialist lenders, requiring additional legal work. Here at MFB, we don’t process equity release mortgage applications, but we can refer you to a trusted specialist.
How much can I borrow?
This varies depending on your financial situation, age at the time of application, and lender. For example, you may be able to borrow up to 75% LTV if you are borrowing into retirement, but up to 70% if you are already retired.
If you need to borrow more, our brokers can help you find a lender to meet your needs.
Lending Criteria for Later-Life Mortgages
Age limits
While there is no maximum age limit to get a mortgage, it varies from lender to lender. Working with a whole-of-market mortgage broker (like us!) means we can point you in the right direction of a lender who can help.
Income requirements
Depending on which mortgage type you choose, lenders must see that you have sufficient income to cover your mortgage payments or meet their affordability checks. You may be able to use multiple different income sources to support your application, including your employment, investments, and pension income.
Credit checks
Like a standard mortgage application, your lender will carry out credit checks as part of the application process. This can affect the types of products and rates you can access.
How to Choose the Right Later-Life Mortgage
If you’re looking for a later-life mortgage, but don’t know where to start, our experts are here to help. We can review the process with you and discuss the best option to suit your circumstances.
When you work with us, you get two dedicated contacts throughout your mortgage application process, meaning someone is always available to answer your questions and is up to date with your case. What’s more, your broker remains the same from initial enquiry all the way through to completion, and your client relationship manager will deal with your lender and solicitor to push the deal through as quickly as possible.
To discuss your next steps, call us on 0345 345 6788 or submit an enquiry here.
