If you are approaching – or already enjoying – retirement, you may be sceptical about your ability to get a mortgage.
There is a lot of stigma regarding senior borrowers that might make you think buying a property is something you can’t do, but don’t be discouraged! Opportunities for older homebuyers to get a mortgage are increasing.
Traditionally, banks would consider loans for anyone over 65 too risky. No longer working, retired people are less likely to be able to meet the monthly payments on their income. In the last two years, 17% of mortgage rejections have stated the applicants’ age as a major factor, and that rises to 21% for those ages between 45 and 54.
But there is a change happening in the market. Increased life expectancy and high house prices are meaning people are buying houses later in their lives, with Halifax saying the average age of the first-time buyer is 31. Because of this, building societies are addressing their maximum age for mortgage applicants.
So, if you are a senior, what do you need to know to give you the best possible chance of an approved mortgage?
Know how much you need to borrow
This is important when investigating your preferred mortgage deal. You will need to calculate how much you intend to borrow and how much you can afford to pay back each month. Additionally, knowing how much you can afford each month will give you an idea of how long you need the mortgage for.
You also need to work out your loan-to-value percentage (% LTV) – how much you intend to borrow compared to the value of the property you want to buy. For instance, if the value of the property is £200,000, and your loan is £150,000, the % LTV is 75%. Unless you have funds available outside of that being used for the deposit, your % LTV is likely to be based on the equity you have in your home.
Prove you’re earning
The most obvious problem with getting a mortgage after you’ve retired is that you won’t have a job anymore. You will need to make sure the money you have coming in will be enough to sustain the payments required – much the same as any working person has to.
These will likely include pensions, investments or insurance policies. If you don’t have enough income then you can try to apply with a guarantor. They will need to show they can cover your expenses on top of their own, however, should you be unable to pay yours.
Check the maximum age
There is a problem with lenders in that they expect mortgages to be paid back by the age of 75, meaning that by the time you reach 50, mortgage lenders are already very sceptical of offering a loan. Many lenders will have a set maximum age, but don’t fret because the trends have changed. Since the aforementioned building societies raised their maximum age limit for mortgage applicants, including Halifax to 80 and Nationwide to 85, hopefully, other mortgage lenders will be inspired to follow suit.
If you’re planning to borrow for a Buy-to-Let mortgage, Barclays have increased their maximum age from 70 to 80, although their age limit for residential mortgages is staying the same. Sadly, more recent reports suggest the larger banks will not be following the example for now, so building societies are the best bet!
Consider a broker
This might sound like an awfully hard sell coming from us, but when it comes to finding a mortgage for seniors it can really make a difference. Many of the building societies willing to lend to older borrowers actually require you to go through a broker. But it’s also recommended you use a broker because if you are on a fixed income, it can be difficult to find a mortgage that doesn’t put you at risk with variable rates. Furthermore, if you are getting income from several sources, a broker will be able to tell you exactly what you need to do to progress your application quickly, which can be confusing on your own.
But most of all, as a senior, you may be best off applying for a specialist mortgage, which is mostly found through brokers. This isn’t absolute: each application is specific to your circumstances, but if you talk to a broker they will offer the best possible options available to you.
Our brokers and advisers can advise you on the best options in a clear, down-to-earth manner, so get in touch!