Applying for a mortgage or remortgaging past the age of 50 can certainly come with new challenges, but it is by no means impossible to get one.
It’s important to understand how lenders see you, and what you can do in your own circumstances to convince them that you are a good choice.
Do mortgage lenders have age limits?
Whilst it is up to each individual mortgage lender to choose their own age limit, the most common limit is 70-80. But some may have a limit as low as 60-65.
Mortgage lenders operate by minimising risk, they want to be sure they will be paid back in full and on time. When you have a regular fixed income and can keep up with repayments over a number of years, a lender will be happy. However, the closer you are to retirement, the less time you have left with a regular fixed income. This is why lenders are hesitant to lend to those approaching retirement age.
What if I’m already retired?
If you have already retired, you don’t necessarily need to worry. It is still possible, though more difficult, to take out a mortgage.
In order to take out a mortgage you will need to show the lender that you have enough money saved for a deposit, you have a strong credit score and you have some kind of ongoing income (e.g. a private pension or investments).
If you own your current house outright this could also help you, as you can use some of the equity from the property to pay towards your new home/mortgage.
What will I be offered as an over 50?
As you may have guessed, in order to minimise the risk of not seeing a return on their investments, the mortgages a lender will offer those over 50 will likely be a lot stricter.
Because retirement is what lenders see as a risk, they will want you to pay off most (if not all) of your mortgage before you retire. For this reason, the terms of your mortgage might include a shorter repayment period. This means you will have to pay more back in less time. For example, while the average length of a mortgage is 25 years, if you are 10 years away from retiring, your mortgage might need to be repaid in just 10-15 years.
This need for higher payments in less time will mean you probably won’t be able to get an interest-only mortgage as their monthly payments tend to be lower.
The amount you can borrow may also be reduced as a result of your age, though it does also depend on your financial situation. If your lender wants your mortgage to be paid off more quickly, before you retire, they may expect you to pay a higher deposit and to borrow less from them. If you can’t afford the cost of a larger than average deposit (really anything over 20%) then there are lenders around who will understand and be more flexible on this front, so don’t panic.
As always, talking to a mortgage adviser is key, as they’ll have access to a range of different products.
What mortgages are best for over 50s?
If you’re between 50 and 60 you should realistically still be able to secure any normal type of mortgage, as long as the lenders are satisfied you meet their requirements. Whether you go for a fixed rate of repayments or a more variable method, it’s worth talking to a mortgage adviser who can base your options around what works for you.As you reach your 60s and 70s, these types of mortgages will be more difficult to get. Remember though if you can show that you have enough savings and income to pay off your mortgage, you can find lenders that will give them to you (though you may have to look harder). But if you can’t secure a conventional mortgage there is another way to go.
For people around 55 and above, another option is equity release
. This includes either the lifetime mortgage or a home reversion plan.
A lifetime mortgage
is a long-term loan that is secured onto your property. You take out this mortgage on your main residence in return for a cash lump sum or smaller pay-outs. When you pass away or move into residential care, the property will be sold in order to pay back the loan and the interest it has gained. The interest on this mortgage is often higher than a regular mortgage. But you don’t have to let it rack up, you are allowed make regular repayments to minimise the debt left when the mortgage ends.
Using a home reversion plan
, you sell your home (or a part of it) to an equity release company. You can continue to live in your home until you die or go into residential care, then the company you sold to will own and sell your home to make back their money.
With both of these equity release schemes, you must remember that you will not be able to leave your home to anyone after you pass away, as you have sold it off to the lender/equity release firm. So, if you intend to leave your property to loved ones, these are not the best options for you.
How can I increase my chances?
To increase your chance of getting a mortgage over 50, the first step is (as always) to. Speak to a mortgage expert. A mortgage broker has the knowledge to find you a lender that will be open to offering over 50s a mortgage and may even find you special deals. They can also give you advice on your application. You should preferably find a ‘whole of market’ broker, as they will have access to the most lenders and deals. A broker is invaluable to anyone looking for a mortgage and we always recommend using one.
Apart from that, increasing your chances comes down to doing what you can to convince the lender you are trustworthy and can make repayments. To convince a lender that you can repay despite the uncertainty of income brought about by retirement, start putting together a plan for how you can keep up with repayments and build trust with your lender. This plan should include:
- Minimising your outgoing spends. Try to spend less money unnecessarily, so that you can focus on paying back your mortgage. This does not mean living on a shoestring budget, but rather being aware of what you are spending and recognising when you can. save more. Our savings guides can help with this.
- Paying your bills on time. Lenders don’t just want to know you can pay them back, but that you can pay them back punctually. They will look at things like your bills to see how responsible you are with payments, so make sure you pay everything as quickly as is possible for you.
- Not taking out any other loans. Having other outstanding debts to repay means that your mortgage will not be the sole focus of your repayments, and you may have to prioritise another loan. Lenders will not like this. If you already have other loans, try to pay them off before applying for a mortgage. Be particularly aware of payday loans, which are not looked on favourably by mortgage underwriters.
- Checking your credit score. A bad credit score, caused by an uneven history of borrowing and paying back credit cards, loans etc, can ruin your chances of getting a mortgage, especially as you get older. Check your credit score; if it is bad, work on improving and maintaining a good score before applying for a mortgage.
What if I get turned down?
If one lender turns you down for a mortgage, remember there are 100s of other lenders out there. It is very unlikely that you will not be able to find any lenders who will be willing to give you a mortgage; all it takes is some shopping around. Again, a mortgage broker will be invaluable to finding you the lenders that will be willing to cater to you.
If you are continuously getting rejected, try to consider different possibilities and different deals that you may be offered, even if they’re not what you had ideally wanted. For example, equity release may end up being your best option even if you hadn’t wanted it. As always, consider the risks and rewards with every option, and don’t make too many applications in one go, as it can impact your credit rating.
Borrowing doesn’t have to be impacted by retirement, and if you’re planning to work for a while yet, then you may have no problem at all. Be sure to discuss your needs with an expert broker.