Buying a new home may be typically seen as a young (wo)man’s game, from your first home after saving up for years to upgrading to a bigger place when your family grows.
However, there are many reasons for older people to move house, from downgrading to a smaller house to finding a new home following a separation to investing in property. And then there are those hoping to remortgage their property to find a better deal.
But what kind of funding can you get for your home once you hit your sixties? The best way to find out the right option for you is to talk to a professional mortgage broker, but to help you get started thinking about your options, we’ve put together the guide below. Let’s get started.
Can someone over 60 get a mortgage?
The short answer is yes – but you need to be aware of some things. It is typically more complex for people over 60 to qualify for a mortgage, and many lenders have cut-off ages for applicants as well as how old you can be at the end of your mortgage term.
For example, if a lender requires your mortgage to be paid off by age 72 and you’re currently 60, your mortgage term can be no more than 12 years. This means steeper monthly payments if you opt for a repayment mortgage.
Some lenders also have a rule that your mortgage has to be paid off by a certain age or by the time you retire, whichever comes first.
But what if you need a mortgage after you’ve retired? There are options for you, too. Some lenders are happy to offer mortgages for pensioners over 70, assessing the affordability of your mortgage based on your state and workplace pensions, your investments, property, savings and income from any work you may have taken on after retiring. Working with an experienced mortgage broker is your best bet to find a deal like this.
Why it’s more difficult to get a mortgage for 60 plus individuals
The main reason it’s more difficult to get a mortgage once you hit your sixties is the perceived risk this presents to your lender. After the introduction of the Mortgage Market Review (MMR) in 2014, lenders have had to assess the affordability of their mortgage products for the applicant based on a number of factors, including age.
As people tend to retire in their sixties, their income usually drops, which impacts the affordability of your mortgage. Ultimately, it’s all about the perceived risk granting you a mortgage would pose for your lender.
Your retirement mortgage options
In addition to a number of standard mortgages you may be eligible for after the age of 60, there are also two types of specialist retirement mortgages available to you: Retirement Interest-Only (RIO) mortgages, and equity release.
These are intended to be loans you take against your house that you already have equity in so that you have increased funds to live off on in your retirement years. This means they’re not always suitable if you’re moving house.
These financing options typically last until you die or move into an assisted living facility, at which point, unless you have another way of paying off your loan, your home will be sold and any money left over after paying off your mortgage will go to your family.
A retirement interest-only mortgage is a good option for downsizers and those looking to remortgage in their retirement years. Once you get an interest-only mortgage for pensioners, your monthly payments will only cover the interest on your mortgage, with the lump sum borrowed typically repayable once you die or move into a care facility.
This allows you to release money from your property towards living expenses or investment and still be in a good position to have something left to pass on to your family. The interest on a mortgage like this will not grow over time, either. The amount you can borrow will depend on your LTV (loan-to-value) ratio and your retirement income.
Equity release is when you borrow some of the money you’ve already paid off from your property. This money can be paid to you in a one-off lump sum or in the form of monthly payments. Both the sum borrowed and the interest on your loan are payable when you die or sell your home.
There are two forms of equity release. The first, home reversion, essentially means you sell part of your property to your lender but can still live in your property until you die or move into an assisted living facility. You can apply for funding like this once you turn 65. It’s worth keeping in mind that using home reversion, you can typically only get around 60% of the market value of your home, so make sure you read the small print.
The second form of equity release is a lifetime mortgage. This means taking a lump sum out of the leverage you already have in your property. There are no mandatory monthly repayments, with interest on your loan being added to the repayable lump sum monthly. You can apply for this form of equity release after you turn 55.
With a lifetime mortgage, your debt can build fast if you’re not making payments towards the amount borrowed throughout the loan term. Not all lifetime mortgages allow you to do so.
However, there is also a form of lifetime mortgage called a drawdown mortgage, where you can withdraw money you’ve borrowed from a reserve whenever you need it, and it’s only at this point that the funds you release from the reserve start to acquire interest.
A word of warning about equity release
While equity release may be an option for you if you don’t want to downsize, need money and don’t have anyone you’d like to leave all or part of your property to, it is also an expensive way to fund your retirement.
It’s typically more expensive than a normal mortgage and could even end up costing you more than it would to move into a smaller home. Interest rates on equity release tend to also be rather steep, and the money you receive could affect your benefits. It could also eat into funds you need for other things later down the line, such as care.
Even worse, when you pass away or move into assisted living, if the sale of your property doesn’t cover your loan and the interest on it, the remainder will fall on the shoulders of your family to pay off.
Edinburgh mortgage advice for mortgages for over 60s
When it comes to funding your property purchase or remortgaging after you hit 60, seeking the help of a mortgage advisor experienced in working with older borrowers is highly advisable.
They can help you find mortgage products from more niche lenders that might not be available to you if you were to approach them on your own, and they can help you create a repayment plan that works for you and won’t leave you or your family in the lurch.
Looking for an Edinburgh mortgage broker with extensive experience working with people over 60? You’ve come to the right place.
Cox & Co have over a decade of experience securing mortgages for borrowers of all kinds, including those with more complex income profiles and financial goals. With our whole-of-market approach and strong relationships with a wide range of lenders, we can help you find the right fit just for you.