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The prospect of getting a mortgage later in life can seem daunting, especially once you retire. Lenders may wonder how you’ll keep up with mortgage repayments if you no longer have a regular income. And the older you get, the riskier it becomes for lenders to offer you a mortgage.
While not all lenders will offer mortgages to customers aged over 65, others will, and some even specialise in offering specific mortgages catered to older borrowers. This can provide a flexible way of borrowing later in life.
A retirement mortgage is designed for people wishing to take out a mortgage that will continue well into retirement or for those who have already retired and need a mortgage.
Older borrowers might want to remortgage as their existing loan might be reaching its end term and therefore requires repayment. Or they might decide they want to top up their retirement income or carry out some home improvements.
Retirement mortgages are generally based on affordability so banks and mortgage lenders will typically require proof that you have the necessary funds to pay back a mortgage even after retirement. As income tends to reduce in retirement, this affordability is central to being approved for a retirement mortgage as lenders will need to be confident you can meet payments over the course of the mortgage term.
Pensioners applying for mortgages must keep in mind that their income and financial position might limit their success in getting a mortgage. This is mainly because a pension income is usually lower than the typical income level required. If you have assets and believe you can meet lending requirements, it’s a good idea to discuss your position in person with your financial provider or mortgage broker, as applying online may be difficult if you can’t demonstrate your capacity to repay the loan.
ROIs and lifetime mortgages generally have a minimum age requirement of 55, with some lenders specifying a minimum age of 60+ as they’re generally geared towards borrowers who might find it more of a struggle to meet the eligibility criteria of standard mortgages.
The maximum age limit is a little more varied as most retirement mortgages are designed to run for the lifetime of the borrower and therefore have no specific end date.
Depending on your own circumstances, you may be more suited to one type of retirement mortgage over another. One key difference between lifetime mortgages and ROIs is that you can free up some cash with a lifetime mortgage without having to commit to making any payments, while you’ll only need to show that you can make the monthly interest payments with an ROI mortgage.
While it’s important to consider each deal carefully, the main difference to remember is that lifetime mortgages will free up the cash when you need it without you having to commit to making any monthly payments.
As each bank or mortgage lender will have its own eligibility criteria, it’s always worth contacting a mortgage broker or lender directly to see whether a mortgage is suitable for you.
As with any applicant for a mortgage, the lender will review whether the amount of benefit you receive is sufficient for you to comfortably repay the loan.
Most lenders will review your application on a case-by-case basis. Your eligibility for a mortgage will depend on the amount of income you receive and how much of this can be used to service a loan.
Other factors including your age, assets and debts will be assessed by a lender on an individual basis.
Each lender will have different eligibility criteria, so it’s best to speak directly with your mortgage broker or lender to determine whether a mortgage is suitable for you.
Among other eligibility criteria required by the lender, you’ll generally need to provide the following:
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