Mortgages for the over-55s: What your options are

Just because you're aged over 55 doesn't mean you can't get a mortgage, however you will need to prove your ability to make the repayments.

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If you’re over 55 you’re eligible for any type of mortgage available on the market, as long as you can sufficiently show that you’ll be able to repay it. Some lenders even have specialist mortgages for older borrowers.

Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

Why might I need a mortgage?

There are a few different reasons why you might need to take out a mortgage, including:

  • Buying a home. You don’t need to be a young 20- or 30-year-old to be looking for a mortgage to buy your own home. After decades of renting, you may have decided it’s time to settle somewhere more permanent.
  • Buying an investment property. If you’ve got spare capital that you’d like to invest, purchasing an investment property could provide ongoing rental income and the potential for capital gains.
  • Buying a place in a retirement village. You may want to purchase a unit in a seniors village to provide a comfortable retirement. However, you should be aware that many lenders are reluctant to accept homes in over-55 villages as security for a loan, because of concern that such properties may be difficult to sell if this ever becomes necessary.

Is there a maximum mortgage age limit?

No. There is technically no maximum age limit for when a UK resident can apply for a mortgage. In fact, The Equality Act of 2010 ensures that lenders don’t discriminate against borrowers because of their age.

Based on that law alone, you could theoretically get a mortgage regardless of whether you’re 18 or 80. Of course, things are a little different in reality. Lenders also have a responsibility to ensure that they only approve mortgages to applicants who can afford the repayments without experiencing financial hardship, so older applicants will find it much more difficult to obtain mortgage approvals than their younger counterparts.

For example, if you’re 55 years old and you apply for a mortgage with a 25-year loan term, the lender will be sceptical about your ability to repay the loan for the next 25 years.

In light of the 2008 financial crisis, more judicious lending by banks and mortgage providers since then has led to some age restrictions on specific mortgage products. With this in mind, it’s worth checking with your mortgage broker to find out which lenders offer mortgages suitable for your needs.

What do I need to do to take out a mortgage if I’m over 55?

If you’re over 55 and applying for a mortgage, you’ll need to provide a greater amount of information regarding your current and future financial position than younger borrowers. If you’re already retired, or about to retire, the less likely you are to be able to fully repay the money you borrow.

To minimise the level of risk, and to also satisfy responsible lending obligations, a lender will ask you to supply detailed information about your employment and the income you earn from all sources, including any pensions you receive. The usual information about credit history, any other outstanding debts and your ongoing expenses is required as well.

What types of mortgage might be available to the over-55s?

If you’re over 55 you’re eligible for all types of mortgages available on the market, such as fixed rate, variable, interest only or offset account mortgages, provided you can provide sufficient evidence that you’ll be able to repay the mortgage. Some lenders even have specialist mortgages for older borrowers which include:

  • Lifetime mortgage. A lifetime mortgage is a form of equity release that you’re eligible for once you’re 55. Essentially, it’s a mortgage secured on your property, provided it’s your main residence, but you retain ownership. You can choose to earmark some of the value of your property as an inheritance for your family. The loan amount and any accrued interest is paid back when you die or when you move into long-term care.
  • Home reversion. This is also a form of equity release, except that in this case you sell part or all of your house to a home reversion provider in return for a lump sum or regular instalments. A home reversion allows you to continue living in the property until you die, rent-free, on the condition that you keep up maintenance and insure it. You can earmark a percentage of your property for later use, possibly for inheritance. The percentage you retain will always remain the same regardless of the change in property values, unless you decide to take further cash releases. At the end of the plan your property is sold and the sale proceeds are distributed according to the remaining percentage of ownership.
  • Retirement interest only mortgage. These are similar to standard interest only mortgages, except that the loan is usually only repaid when you die, move into long-term care or sell the house. To be eligible for this kind of mortgage, you only have to prove that you can afford the monthly interest repayments, and while there’s no minimum age requirement, these are generally aimed at older borrowers, who might find them easier to qualify for than a typical interest only mortgage.
  • Home Ownership for People with Long-Term Disabilities (HOLD). This scheme applies if you have a long-term disability. You can only apply for HOLD if the properties available through the other home ownership schemes don’t meet your needs, for example, you need a ground-floor property so you don’t have to climb stairs.
  • Older People’s Shared Ownership. If you’re aged 55 or older, you can get help from a home ownership scheme tailored for older people. It works in the same way as the general shared ownership scheme, but you can only buy up to 75% of your home. Once you own 75%, you won’t have to pay rent on the remaining share.

How to compare mortgages

  • Interest rates. Interest rates are one of the most important elements to compare as interest is the biggest expense for mortgages. For pensioners, it’s important to look for the lowest interest rate because this is what will help you save money.
  • Mortgage flexibility. It’s important for your mortgage to provide you with flexibility. This may be flexibility in repayment schedules or in making additional repayments. Compare each loan and see what flexibility it can offer you.
  • Eligibility requirements. Some mortgages will require you to meet certain eligibilities in order to take out that mortgage. This may include a regular source of income, a good credit history and more. Pensioners in particular should compare the eligibility requirements of mortgages because some may be more appropriate to apply for than others.
  • Fees and charges. Most mortgages have mandatory fees and charges that you may have to pay. Compare any potential fees and charges each loan has (these may be either upfront fees or ongoing fees) and select an option with lower fees to help save money.
  • Loan term. Each mortgage provided by lenders will have a different loan length. Compare and select the mortgage that provides you with the loan term to meet your needs.

Am I eligible for a mortgage if I’m on a disability benefit?

Generally, disability benefits are considered a valid form of income by most lenders. Therefore a mortgage application for someone on disability benefits isn’t treated any differently from an application where someone services their loan with other forms of income.

Like any applicant for a mortgage, the lender will review whether the amount of income support 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.

Pros and cons of mortgages for the over-55s

Pros

  • Gives you funds when you need them. These mortgages allow pensioners to enter the property market and give you the funds you need, when you need them.
  • Extra benefits. Some mortgages available to pensioners come with extra benefits such as low or no interest rates, flexible payment plans and advance payments.

Cons

  • Higher interest rate. Equity release mortgages tend to have higher interest rates compared to other mortgages.
  • Eligibilities. Some mortgages have specific eligibility requirements you must meet that may be quite stringent.

Frequently asked questions about mortgages for over-55s

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