Almost 12 million people in the UK are over the age of 65, and the amount of older people in the UK looking to get a mortgage is increasing dramatically. With Personal Loans Now, you’ll discover why mortgages for older people are becoming easier to find, and what your options are.
- Older people taking mortgages The age limits The difficulties for older borrowers How easy it is to get a mortgage
- Finding the right mortgage Equity release mortgages Conclusion
Mortgages for Older People
People need to borrow large sums of money to buy property whatever their age and the mortgage market has until quite recently not made borrowing for older people very easy. According to AgeUK, there are 72% more centenarians than there were a decade ago and we are living for longer. There are just under 12 million people in the UK who are aged over 65.
Some people who are nearing retirement may wish to sell their property to be nearer their family or to downsize and will need a new mortgage for this reason. Others may want to supplement their retirement by releasing some equity in their home to make themselves more comfortable. Many just want to switch their mortgage to more favourable terms.
Age Limits for Getting a Mortgage
Officially there are no age limits for people who want to take out a mortgage, but lenders all have their age limits. This can be for the age of the borrowers once they finish paying the long term loan, or from the age that they are when they take it out. For most lenders, the age by which time they want their money is 70 to 85. The maximum age for taking a mortgage out with the majority of mortgage companies is from 65 to 80. A recent mortgage product called 55+Mortgage from a specialist lender is now offering mortgages to people until they are 95. For a 65-year-old taking out a mortgage it may only be able to be for a 15-year term if their company has a maximum repayment age of 80 years old.
Why is it Difficult for Older People to Get Mortgages?
Lenders are under the obligation to follow the (MMR) rules that dictate to the lender that the person who is taking out the mortgage must comfortably be able to repay the borrowed money for all of the agreed mortgage term. When people retire, they lose their monthly salary and can take a cut in their income that could affect their ability to get finance. For lenders, this means that mortgages for older people are riskier as they are not sure if they will be able to repay.
So what have we learned so far?
- Until recently getting a mortgage for older people was quite difficult.
- People are living for longer, and there are 12 million people over 65 in the UK.
- Some people remortgage their houses when they are nearing retirement to downsize or for better mortgage terms.
- Lenders have age limits for people taking and repaying their mortgages.
- If an older person takes a mortgage, it may only be for a shorter term until the maximum repayment limit.
- Lending to older people is riskier as lenders cannot be sure of their ability to repay
Mortgages for Pensioners and People Nearing Retirement
Lenders are happy to offer mortgages to older people as long as they can prove that they will be able to cover the repayments after they retire. They may have to ask their pension provider for personal details such as their retirement date, how much is in the retirement fund and what their estimated income will be. It is sometimes easier for people who are already retired to lend as they can already show their income. Other investments that provide an income can also be shown to lenders and included in the total to increase their chances of successfully applying for a mortgage.
Comparison sites that compare the prices of mortgages and have all the details including age limits are a good place to look. Most specialist mortgages for older people can be found through mortgage brokers, and many are sold exclusively through them. They will check the person’s finances and match them up with the right product. It is important for borrowers to choose the right mortgage for their circumstances. As many mortgage holders are becoming older when they purchase their first home and are taking 30 – 35-year mortgage agreements it is not so unusual anymore to have people paying off mortgages during their retirement years.
Is an Equity Release Mortgage a Good Alternative?
Equity release can be an expensive way to borrow, but for some people, it is the right option for their particular circumstances. They can release their money that is tied up in their property in a lump sum or arrange to have a monthly income which can help avoid requiring a personal loan to cover monthly expenses. Some borrowers use this money to make a big purchase or to pay off their mortgage while others just want to fund their retirement. The repayments occur when the borrower either sells the home to go into care or passes away.
The mortgage market has changed in recent years as people are buying their first houses when they are older and take out mortgages for longer terms. This has led to many mortgage holders being retired and still paying off their mortgages. A large number of banks and building societies have changed the age limits for borrowers to accommodate those who are creditworthy despite being pensioners. Mortgage brokers tend to specialise in mortgages for older people and can help them assess their finances and find the right mortgage product to suit their particular circumstances.