Is it Hard to Get a Mortgage When Retired?
If you are trying to get a mortgage over the age of 50 you might be finding the process frustrating. You may need a mortgage for a variety of reasons and it is quite common for people to need a mortgage later in life.
The great news is that your age will not prohibit you from getting some form of mortgage, whether that is a traditional mortgage or an Equity Release product. There are eligibility criteria that you must pass for each type of mortgage and this guide gives you information about retirement mortgages.
Use this guide to understand retirement mortgages in detail and refer to it during the process to improve your chances of mortgage acceptance.
- Reasons for Getting a Mortgage as a Pensioner
- What is the Age Limit When Getting a Mortgage?
- Are There Special Requirements for a Retirement Mortgage?
- Will My Health Be Considered?
- Mortgages for Over 50s
- How Can I Increase My Chances of Getting a Mortgage Over 50?
- How to Get a Mortgage in Retirement
Reasons for Getting a Mortgage as a Pensioner
Our financial needs change as we get older. It is no secret that growing older presents challenges and a large portion of retirees seeking mortgages are trying to downsize, free up money for home improvements or supplement their retirement income.
Of course, the list of reasons for needing more money later in life is extensive. When you consider a mortgage product you will need to decide what the money is needed for.
Traditional mortgages will only allow you to borrow money against your property under certain circumstances. Common reasons for remortgaging in retirement are home improvements or to build an extension.
Equity Release products, especially lifetime mortgages, are much more flexible and allow you to spend the money entirely as you wish. For example, with an Equity Release product you can spend the funds on the holiday of a lifetime or a brand-new sports car. Whereas both of those reasons would not be entertained by a traditional mortgage provider.
What is the Age Limit When Getting a Mortgage?
All traditional mortgage products have an upper age limit. Different lenders have different age limits.
Generally, standard mortgage lenders will offer mortgage terms up to age 70. Although, there are some lenders that accept mortgage terms to age 80 and beyond.
As you can see, taking a mortgage later in life results in a restrictive term and you may be expected to pay off the mortgage in a matter of a few years rather than decades in the future.
Equity Release products work in the opposite way and have a minimum age of 55 years to qualify.
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Are There Special Requirements for a Retirement Mortgage?
The main concern that a traditional mortgage lender will have is your ability to repay the mortgage. This is known as your mortgage affordability.
If you are approaching retirement you will need to state your anticipated retirement age, provide wage slips, or tax documents (if self-employed) and information about your pension income if your mortgage term takes you beyond retirement.
If you have already retired, you will need to demonstrate that your pension income is sufficient to cover the mortgage payments.
It is common for traditional mortgage lenders to request pension statements.
Equity Release can act as a lifeline for those in retirement that need to raise a mortgage but have no or minimal income.
Equity Release does not require income details as the mortgage is repaid when you pass away or go into long term care. With Equity Release, commonly known as a lifetime mortgage, how much you can borrow is based on your age and the value of the property.
Both mortgage products will require a credit check and you should ensure your credit score meets a lender’s minimum credit score threshold. If you are worried about your credit score you should discuss this with your mortgage broker prior to making a mortgage application.
Will My Health Be Considered?
Standard mortgage lenders, who restrict your mortgage term, will not consider your health when offering a mortgage. They will focus on your income, financial commitments, term requested, among many other factors.
However, Equity Release Lenders will consider your health when taking an application. If you have poor health, that has been diagnosed by a doctor, you may have access to better interest rates and higher loan sums than healthy applicants. The reason for this is that if the lender believes that they will receive their money quicker (following death or movement to long-term care) from mortgage redemption, this reduces the risk profile of the loan.
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Mortgages for Over 50s
It is common for people over the age of 50 to have a mortgage. For example, if you took a mortgage out when you were 30 and have a 35-year term on the mortgage you will be entering the final third of your mortgage term by age 50.
Mortgage lenders are familiar with helping borrowers obtain mortgages over the age of 50, so being this age should not be a cause for concern.
With that said, as years advance over 50, the chances of getting a traditional mortgage decline. This is especially the case if you have retired and are using pension income to pass an affordability check.
With traditional mortgages, your mortgage affordability will naturally decline as you get closer to retirement age. As a general rule of thumb, the shorter your mortgage term, the lower your affordability.
This is why the Equity Release market has a minimum age of 55, to assist those who can not obtain a traditional mortgage later in life.
How Can I Increase My Chances of Getting a Mortgage Over 50?
The best way of improving your mortgage chances over the age of 50 is to consult with a mortgage broker, like Boon Brokers. A mortgage broker will be able to assess your income and compare it with lender requirements.
Additionally, a reputable Whole of Market mortgage broker will have access to a range of lenders that you might not be able to approach directly. They will also have access to life insurance providers that require intermediaries like Lloyds of London.
Finally, if your mortgage broker has the regulatory permission to advise on Equity Release products, they can provide a comparison of the mortgages and make a well informed recommendation for your circumstances.
How to Get a Mortgage in Retirement
Boon Brokers is a Whole of Market Mortgage, Insurance and Equity Release Brokerage. Boon Brokers provides free no obligation mortgage advice.
Book your free over 50s mortgage consultation with Boon Brokers today.