Getting a Mortgage in Retirement
“I am in my 60s, and I am looking to buy a new house. I have recently divorced, and I have been renting since separating. I am now retired with a full state pension and a private pension that provides me with roughly £30,000 a year. I can afford a deposit of about half the value of the house I am looking to buy. Will I be able to get a mortgage at my age?”
It is unlikely that your age will prevent you from getting a mortgage, however, it is worth mentioning that lenders may decide to impose a maximum age for the end of your mortgage term – in many cases age 85. This will impact the overall term for your loan and may make your repayments higher.
Whether you’re buying a new house at 25 or 65, your lender will want to know that you can repay the mortgage in full. This means that lenders will expect you to pass all their affordability checks before agreeing to a mortgage. You may find that this will limit the amount that you can borrow, particularly with a standard repayment mortgage where you repay interest and capital every month. Mortgage lenders will look at your current income and your income in retirement.
An alternative might be a Retirement Interest-Only (RIO) mortgage. This type of mortgage is specifically designed for those aged 55 and over. An RIO mortgage involves paying just the interest on a loan each month rather than a mixture of capital and interest. You may find this type of mortgage beneficial as it could make your mortgage more affordable because you only have to demonstrate that you can afford the interest – however, the mortgage offer will still depend on your income assessment and overall affordability. The full capital amount and any outstanding interest would usually be repaid if the property is sold, when you go into care, or on your death. However, some RIO mortgages have a fixed term, just like a standard mortgage, which means you would need to consider how to repay the outstanding capital at the end of the term. Interest rates on this type of mortgage can be higher than a standard mortgage, so it is important to shop around.
Another option to consider is a Lifetime Mortgage, which is a form of Equity Release. With a Lifetime Mortgage, you borrow against the value of your property. Interest can either be paid during your lifetime or “rolled up” and added to the amount due when the property is sold – usually when you go into care or on your death.
I would recommend speaking to an Independent Mortgage Adviser before making any decisions. This will allow you to explore all available options and decide based on your circumstances and goals.
Your home may be repossessed if you do not keep up payments on your mortgage. There will be a fee for the mortgage advice. The precise amount will depend upon your circumstances and the type of lending taken. Minimum Advice Fee £950 from 1st January 2022. For equity release and RIO mortgages, we charge a fixed fee of £1100. Using equity in your home will affect the amount you can leave as an inheritance. Any means-tested state benefits (both current and future) may be affected by any equity released. This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.
Any opinions expressed in this article do not constitute advice.