While some homeowners in their fifties are nearing paying off their mortgage, that’s certainly not the case for everyone. Today, there are many older borrowers that need to secure a new mortgage for a variety of reasons, including:
- Looking to ease cost of living pressures by extending the mortgage term to reduce monthly payments
- Refinancing to help children buy a home of their own
- Wanting to release equity to travel or reinvest
- Downsizing, but still needing a mortgage
- Moving to a more expensive area for work or family reasons
The good news is that it is possible to get a mortgage later in life, but lenders will have slightly different criteria when considering your application.
Here are some of the key things you need to know and consider:
Proving your ability to repay the loan
The most common mortgage term – the length of time over which you repay your borrowing – is 25 years. With the retirement age for both men and women being 67, applying for a mortgage into your 40s can be fairly straightforward.
However, when a term extends into retirement, lenders begin to place more focus on your ability to make all the repayments. Once you are no longer in employment and have lost those stable monthly earnings, what income or savings will you rely on to service the debt?
How old will you be at the end of the term?
Many banks and building societies will only consider giving borrowers a mortgage up to 75 or 80 years of age. There are some specialist lenders that will grant a longer mortgage term, but it’s important to be aware of all the conditions, especially if you choose a Retirement Interest Only mortgage. Although this allows you to keep repayments affordable until the property is sold, there is usually a significant additional amount payable on redemption of the mortgage, so if you are looking at this option, it’s worth chatting it through with family first.
How much are you borrowing?
Something that’s not often talked about is the minimum amount a lender is prepared to offer. Because of the costs associated with mortgage loans – processing, underwriting and other administrative costs – and the amount of interest they can charge, small loans are often simply not worthwhile. So, if you’re looking for a new mortgage deal later in life and you only need or want to borrow a small amount, be aware that it may be harder to secure and you might need a more specialist lender.
Are you buying for the first time?
If you are over 50 and looking to buy for the first time, you are part of a growing market. And if you have a steady income stream and a good deposit - perhaps that’s come through inheritance or from saving over time - lenders may view you as relatively low risk.
3 top tips for successfully securing a mortgage over 50
1. Work with an experienced broker. A mortgage broker can be a huge help in getting the right mortgage whatever age you are, but when it’s a specialist market, you really will benefit from their expert guidance and knowledge. An experienced broker can help you access the most appropriate providers – some of which are not necessarily on the high street - and secure the right loan for your circumstances. They will also be able to explain everything you need to know and should save you a lot of time and effort in the application process.
2. Clarify your retirement plans. If your mortgage term is going to extend into retirement, lenders will want to verify your retirement income, which will include pension plans. Make sure you can provide things like pension statements, proof of income from investments and any savings – everything that will reassure lenders of your ability to repay the loan.
3. Maximise your deposit. Lenders often require a higher minimum deposit for older borrowers, commonly 20%-30%. Putting down a bigger deposit will reduce the risk for lenders, which can be particularly helpful if you want to borrow into retirement. So it’s well worth discussing your funding options with a qualified and regulated broker or financial adviser.
If you are over 50 and looking to either buy a property or remortgage your existing home, we are here to help. Complete our contact form to arrange an appointment, chat with an adviser online or call us directly on 0800 144 4744.
