Guide to mortgages for older borrowers

As people are now living and working longer than before, it is possible to get a mortgage at an older age than previously thought possible. This guide explains the basics of borrowing at an older age.

What is the age limit for getting a mortgage?

The maximum age for a mortgage varies depending on the lender and the borrower’s circumstances. Some lenders may consider lending up to age 80 or even 85 if the borrower has sufficient retirement income to support the mortgage payments. 

Other lenders may have lower age limits, such as 70 or 75, or may require the mortgage to be fully repaid before the borrower reaches a certain age, such as their planned retirement age.

Additionally, there are specialised mortgage options such as retirement interest-only mortgages or equity release mortgages that can allow borrowers to continue borrowing into their later years.

Why is it harder to get a mortgage when you’re older? 

• Income: As people approach retirement age, they may have reduced income if they are no longer working or working fewer hours. This can make it more difficult to meet affordability criteria when applying for a mortgage.
• Repayment period: Lenders may be reluctant to offer mortgages with long repayment periods to older borrowers due to the risk that the borrower may pass away before the mortgage is fully repaid.
• Age Restrictions: Some lenders may have age restrictions on their mortgage products, which can make it harder for older borrowers to secure a mortgage
• Health: As people age, they may be more likely to experience health issues that can impact their ability to work or earn income. This can be a concern for lenders when assessing a borrower’s ability to repay a mortgage.

Considerations when borrowing at an older age 

When considering borrowing over an older age, there are several important things to keep in mind.

Here are some additional points to consider:

•  Affordability: Before borrowing, it’s important to ensure that you can comfortably afford the mortgage repayments. This is particularly important if you are no longer working or have a reduced income in retirement.
• Repayment method: There are different types of mortgage repayment methods available, such as interest-only or capital repayment. Consider which repayment method is best suited to your financial circumstances and goals.
• Retirement plans: Think about your plans for retirement and whether you will have sufficient income to cover mortgage repayments. If you plan to retire soon, it may be worth considering a shorter-term mortgage to avoid having to work into your retirement years.
• Equity release: Depending on your circumstances, an equity release mortgage or lifetime mortgage may be an option. These types of mortgages allow you to release equity from your home to use as a lump sum or regular income while still living in your home.
• Life insurance: It’s important to consider that life insurance may be more expensive or difficult to obtain as you get older. This is particularly important if you are taking out a joint mortgage, as the death of one borrower could leave the other with an unmanageable debt.
• Downsizing: It’s worth considering whether downsizing your property could be a feasible option in the future. This could be used as a fallback plan if your financial circumstances change or as a way to release equity to pay off your mortgage.
• Specialist lenders: If you have difficulty obtaining a mortgage from mainstream lenders, there are specialist lenders who may be able to offer more tailored solutions. However, these lenders may charge higher interest rates or have stricter lending criteria. 

How is borrowing for elder borrowers assessed? 

The maximum age you can borrow will depend on a few factors, the biggest consideration is whether you are looking at borrowing based on your earned income or retirement income. 

Below we explain how most mainstream residential lenders assess borrowing for elder borrowers. However, there are other options available, like equity release, which is covered separately.

Based on earned income 

Earned income can usually only be used up until your planned retirement age, your planned retirement age is not necessarily the same as your state retirement age.

 For example, your state retirement age maybe 68, but you intend to work until you are 75. Some lenders may consider lending until age 75 in this scenario. 

The industry and occupation may have some bearing on the age you can borrow until, for example, it’s improbable that a scaffolder would work until age 75, and you may find some lenders would insist on a shorter term. 

Some lenders may still consider lengthier terms for people in manual roles if for example, they intend on switching to a less physical role within the company, perhaps a managerial role. 

If you’re considering borrowing past age 70, many lenders will insist that you are contributing towards a pension scheme. 

The pension contribution requirements are fairly vague, for example, a small contribution on a payslip would usually suffice, and generally, there is no minimum contribution required, nor are they concerned with the size of the pension fund. 

Some lenders do not insist on a pension contribution, although you will have more options if you do. 

When basing on your earned income, most lenders will cap borrowing at either age 70 or 75 and a handful until age 80.

Whilst borrowing is available over these terms, it’s important to understand the potential implications. Ask yourself, is it reasonable for you to maintain the mortgage payments over the entire term, and do you want to be repaying a mortgage in your latter years? 

Based on retirement income 

Unlike earned income which has a shelf life, retirement income is more reliable and can often guaranteed for the entirety of your life. 

Mortgage providers may therefore feel more comfortable lending until a later age, and you may find you have more options securing a mortgage until age 75-80 compared to using your earned income.

Typically, most people’s retirement income will be lower than their earned income and, therefore unable to borrow as much if based solely on their retirement income. 

What types of mortgages are available to older borrowers?

Here are the different types of mortgages available for older borrowers; the most suitable will depend on your age, income and requirements:

• Traditional Mortgage: This is a regular mortgage product that is based on the borrower’s income, affordability, and credit score. The maximum age limit for this type of mortgage is typically up to 75 years or occasionally 80, depending on the lender. The borrower will make monthly payments, and the loan is paid off over a fixed term.
• Equity Release/Lifetime Mortgage: This is a type of mortgage that allows older homeowners to release equity from their home without having to sell the property. The borrower does not make monthly payments, but the interest on the loan is added to the total amount borrowed, which is paid off when the property is sold or upon the borrower’s death. The maximum age limit for this type of mortgage is usually 55 or 60, and the borrower must own their home outright or have a significant amount of equity in their property.
• Home Reversion: This is a type of equity release product where the borrower sells a percentage of their property to a provider in exchange for a lump sum of money or regular payments. The provider then owns a share of the property and is entitled to a percentage of the sale proceeds when the property is sold. The borrower can continue to live in the property for the rest of their life, but they must maintain the property and pay all the associated costs.
• Retirement Interest-Only (RIO) Mortgage: This is a type of mortgage that allows older borrowers to make interest-only payments on the loan until they die or sell their property. The loan is paid off by selling the property, and the borrower must have a reliable income to qualify for this type of mortgage. The maximum age limit for this type of mortgage is usually up to 80 years old.

You will need to take legal advice before releasing equity from your home, as Lifetime Mortgages and Home Reversion plans are not right for everyone.

How to improve your chances of securing a mortgage as an older borrower? 

• Have a pension set up: Most lenders require borrowers to have a pension set up to borrow past state retirement age. Therefore, having a well-funded pension in place can improve your chances of getting a mortgage as an older borrower.
• Put a bigger deposit down: Putting down a larger deposit can increase the amount you can borrow and improve your chances of getting approved for a mortgage. This is because the lender may see you as less of a risk if you have more equity in the property.
• Consider a longer term: Lenders may be more willing to lend over a longer term if your job is plausible to continue until an older age. For instance, if you have a less physically demanding job or if you could take a more clerical/managerial role in the future, this could improve your chances of being approved for a mortgage with a longer term.
• Maintain a good credit score: A good credit score can significantly improve your chances of being approved for a mortgage. This is because lenders see borrowers with a good credit history as less of a risk and more likely to make repayments on time.
• Show evidence of a stable income: Lenders will want to see evidence that you have a stable income, whether that’s through earned income or retirement income. If you are still working, having a stable job history and a steady income stream will work in your favour. If you are retired, having a steady and reliable source of retirement income, such as a pension or annuity, can also help.
• Reduce your debts: Lenders will also look at your current debts and financial commitments when deciding whether to approve your mortgage application. If you have a lot of outstanding debts, such as credit cards or personal loans, it could affect your ability to get approved. Try to pay off as much of your debt as possible before applying for a mortgage
• Seek advice from a specialist broker: Working with a specialist mortgage broker who has experience in dealing with older borrowers can be helpful. They can help you navigate the various options available and identify lenders who are more likely to approve your application.

What interest rates are available for older borrowers? 

Interest rates for older borrowers can vary based on their circumstances and market conditions. Typically, if you’re in your 50s and not looking to borrow past age 75, you should have a good selection of lenders available to you, and you may be able to obtain competitive rates. 

However, as you move into your 60s and 70s, the number of options may be more limited, and you may need to work with specialist lenders who offer mortgages for older borrowers. These specialist lenders may charge higher interest rates than traditional lenders, so it’s important to carefully compare rates and terms to find the best deal.

How can Strive Mortgages help?

Arranging a mortgage is always a big decision, but even more so when you’re considering borrowing later in life and potentially into retirement. Having a broker with experience in later life lending to help you understand the options available to you can be of real comfort and ensure you have the best chance of success when applying.

Working with a mortgage broker like Strive Mortgages can be particularly helpful for an older borrower for several reasons:

• Access to a wider range of lenders: Mortgage brokers have access to a wider range of lenders than a borrower may have on their own. This can be particularly helpful for older borrowers who may be limited in their options due to age or retirement status.
• Expertise in mortgage products: A mortgage broker can help you navigate the various mortgage products available, including those specifically designed for older borrowers. They can provide insight into the pros and cons of each product and help you determine which one is best suited for your unique financial situation.
• Assistance with paperwork and application process: Applying for a mortgage can be a complex and time-consuming process. A mortgage broker can help you gather all the necessary paperwork and guide you through the application process to ensure everything is completed correctly and on time.
• Negotiating with lenders: A mortgage broker can use their expertise to negotiate with lenders on your behalf, potentially securing a better mortgage rate or more favourable terms.

Overall, a mortgage broker can help an older borrower navigate the mortgage process with greater ease and potentially increase their chances of securing a mortgage.

For more information about older borrower mortgages, please contact a member of the Strive team, by emailing info@strivemortgages.co.uk or call us on 01273 002697.

Frequently asked questions about older borrower mortgages