A Guide to Mortgages for over 55's
Whether over 55, 60 or even 70, there are options available to you.
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Mortgages for over 55
In fact, the below covers anyone looking to take out finance on their home between the ages of 55 to 85, and in some cases older.
Mortgage Lenders in recent years have really started to embrace this area of the market.
Which now means there are more Mortgage options for over 55’s than just Equity Release.
We’ll go through the options available to each age group and also consider the different incomes that can be used to support a Mortgage Application.
Including, Pension and/or Benefit income only options.
Can a 55 year old get a Mortgage?
Yes, absolutely. In fact, you will have just about as many options to choose from as anybody else would.
We often find potential borrowers we speak to are concerned they won’t be able to get a Mortgage after 55, but it’s more than possible.
The Mortgage Lender will just need to establish these 3 things:
What age you will be at the end of your Mortgage
Whether you will be lending into retirement
And if so, what income you will have after this point.
What are the Mortgage age limits?
It’s important to note that every lender is different. So whilst some Mortgage Lenders will allow you to only go up to age 70 on your Mortgage.
Some lenders, have no limits.
The age limit for taking out a Mortgage is:
Age 70 to 85 with most – however a few have no limit
The age limit by which your Mortgage will need to end is:
Age 75 to 85 with most – however a few have no limit
The key point to take away from this. There are going to be options available regardless of your age.
Mortgages which have no limit on when they need to be repaid are generally interest only Mortgages, known as:
Retirement Interest Only Mortgages.
both of which are discussed in greater detail below.
Lending into retirement
Lending into Retirement is when you take out a Mortgage and the term, goes into your retirement.
You could be retired during the entire term of the Mortgage. Or just for a couple of months, toward the end of your term.
In either case it will be classified as lending into retirement. Where a Mortgage goes past your estimated retirement date, Lenders will usually need to assess your retirement income in the same way they would assess your employed or self employed income.
This will often have a detrimental affect to the amount you are able to borrow, as most of the time your Retirement income will be less than your current employed or self employed earnings.
So there are a number of things a Mortgage Advisor will consider when choosing the best lender for you, if the above could apply.
See our Lending into Retirement age limits below, for more detail.
Lending into Retirement age limits
Max retirement age is 80: Some Lenders will allow you to declare a retirement age of up to 80. Meaning you can use employed or self employed earnings up to age 80.
You can use Retirement income from age 55: All Lenders will accept retirement income partially or in full from age 55. Providing this can be evidenced.
More than 10 years from Retirement: If your Mortgage term is more than 10 years away from retirement. Some Lenders won’t need to see proof of retirement income.
Less than 10 years from Retirement: Where you are less than 10 years away from your declared retirement date. Most Lenders will wish to see evidence of retirement income.
Mortgages for the Retired
Below of the different Mortgages available for the Retired:
Capital Repayment Mortgages up to age 85
Retirement Interest Only Mortgages with no maximum age limit
Lifetime Mortgages with no maximum age limit
Capital Repayment Mortgages for over 55
Whether you’re retired or not.
You will be able to take out a Capital Repayment Mortgage up to age 80-85, subject to your circumstances.
We feel it’s important to stress this, as there are usually plenty of Interest Only options available, but we often find many over 55’s want a Capital Repayment Mortgage.
Retirement Interest Only Mortgages
Not to be confused with Equity Release.
Retirement Interest Only Mortgages can be a great and cheaper alternative to Equity Release.
Your monthly payments to the Lender will consist of Interest Only.
Meaning your original Mortgage balance will not reduce unless you make any over payments.
The Mortgage only needs to be repaid if you:
Sell your home
Move into Long term care
Or Pass away.
Lifetime Mortgages/Equity Release
Lifetime Mortgages or Equity Release are similar to Retirement Interest Only Mortgages, but tend to be more flexible.
With Lifetime Mortgages, you can chose to:
To take a Lump Sum: A set amount from the outset.
Or on a Drawdown Facility: This is where you take an initial lump sum, and then can take out additional amounts to suit you, up to a set level.
You can then choose how to pay the interest from your Mortgage:
Interest Only: Where you pay back just the interest each month to the Lender.
Interest roll-up: Where you don’t have to pay any of the Interest back to the Lender and it is instead compounded and added to your Mortgage.
In this instance the amount you owe, can never exceed the value of your home. You can also choose to take a lower Mortgage and guarantee that you leave a bit of the value of your home to your beneficiaries as a lump sum.
Like Retirement Interest Only, you only need to repay your Mortgage should:
You Sell your Home
Move into long term care
What is the difference between Retirement Interest Only Mortgage and Equity Release
Lifetime Mortgages are very similar to Retirement Interest Only Mortgages in their features, but do have a key difference.
With Lifetime Mortgages/Equity Release, the borrower doesn’t have to repay any of the Interest at all, although they can if they want to.
However, the main thing that makes Lifetime Mortgages different to Retirement Interest Only is the way your maximum borrowing is assessed.
With Retirement Interest Only; the amount you are able to borrow is based on affordability. Which is calculated using your income and outgoings.
With Lifetime Mortgages; the amount you are able to borrow is based on your property value and your age. The older you are, the more you will be able to borrow.
What income can be used on Mortgages for over 55’s
This income can be used to support your application up to the age of 70, 75 or 80, dependent on the Mortgage Lender.
Retirement Income: Retirement income such as Private or State pension can be used. In many cases this can be in addition to the above income.
Benefits: These days, most benefit income can be used. Each Lender will have their own criteria on what benefit income they do and don’t accept.
There are some lenders which will accept any type of benefit income, including Personal Independence Payments, Tax Credits, Universal Credit etc.
Buy to Let Mortgages for over 55’s
Getting a Buy to Let Mortgage when you are over 55, is pretty straight forward.
Buy to Let Mortgage Lenders will permit most borrowers term, to go up to age 85 as standard, with some Mortgage Lenders having no age cap at all.
This is due to Buy to Let Mortgages being less dependent on your personal income. And more so on the rental income, which will need to more than support your monthly Mortgage payments.
What Mortgage Repayment options will I have?
You will be eligible for the same repayment options as any one else would.
On the repayment options, you will have the following to choose from:
Capital & Interest Repayment: Will repay your Mortgage balance as well as the interest to the Mortgage Lender.
Providing you keep up with repayments you are guaranteed to have repaid your Mortgage by the end of the term.
Interest Only: Where you just pay the interest to the Lender each month.
As mentioned above, Interest only payments to the Mortgage Lender will mean at the end of the term, you will still have the full Mortgage balance to repay.
Offset: Harder to come across these days. An offset Mortgage is where you have a savings account linked to your Mortgage.
The money you save into that account is taken away, or offset, from your Mortgage balance that you pay interest on.
Offset Mortgages are good for those with large savings balances.
What types of Mortgages for over 55’s are available?
There are 7 different types of Mortgages available for over 55’s and those lending into retirement:
Fixed Rate Mortgage: Simply put, this is where your Mortgage is fixed for a certain period of time, usually for 2 to 5 years.
The rate is best to be thought as fixed for you and the Lender.
As during this time your interest rate is guaranteed not to change. And you are unable to leave the Mortgage early without paying a fee to the lender for doing so.
Variable Rate Mortgages: Where your interest rate can vary. You will usually have a set interest rate which can fluctuate throughout the term.
The interest rate will usually change in line with the Bank of England base rate, although it doesn’t have to.
Tracker Mortgages: Where your interest rate will track a certain index, usually the Bank of England Base rate.
When the Base rate changes, so will your Mortgage rate.
Discount Mortgages: A variable rate Mortgage which will be discounted by a set amount, usually from the Mortgage Lenders standard variable rate, for a defined period of time.
Other Mortgage Types:
Flex Fixed Rate Mortgages: This types of Mortgage is rare, and only a couple of Mortgage Lenders offer these. But they can be great.
This is where you have the security of a fixed rate, without the downside of an Early Repayment Charge to leave the Mortgage, should you need to.
So if you anticipate that you may wish to repay your Mortgage early. This can be a great option.
Cap and Collar Mortgages: A type of Tracker of Variable rate Mortgage which can not go above a certain rate (the Cap) and/or cannot go below a certain rate (the Collar).
What documentation will I need to provide the Mortgage Lenders?
What documentation is required for the Mortgage, will vary between Lenders.
Mortgage Lenders will usually just need to verify your income and outgoings.
To do this they will require the following:
Payslips or Accounts/Tax Calculations for any Self Employed Earnings
Bank Statements to evidence Pension, Benefits, Earnings and Outgoings
Identification to prove your Name and Address.
When evidencing Pension Income, Lenders will also often accept:
Annual Statements or
P60’s as an alternative to payslips
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