An increasing amount of lenders have deals for older customers.
Inews reports that people are living longer and taking on more mortgage debt later in life, but many lenders are still wary of taking on applicants approaching retirement age.
Borrowers over the age of 50 will likely face a different range of home finance options and restrictions to their younger counterparts.
There is no age limit when applying for a mortgage, but the pool of options becomes smaller after this age and some lenders set age limits as low as 55 for the mortgage to be repaid.
Nevertheless, it is possible to still take out a mortgage later in life and there are options out there for people who don’t want to downsize or leave the family home if they cannot re-mortgage.
Clayre Bareham, business development manager at Mortgage Advice Bureau’s later life division, says there are three main types of later life products: standard mortgages, retirement interest-only mortgages, and equity release.
Historically, most banks and lenders would allow a borrower’s mortgage term to run until reaching their state pension age.
But an increasing number of lenders are offering extended repayment terms. Some high street names are willing to lend to people above the age of 80 and Nationwide, the UK’s second-largest mortgage lender behind Lloyds, allows people to borrow money up
until their 95th birthday.
Smaller building societies and challenger banks are also worth considering, as they are likely to offer more flexible terms than traditional providers.
Lenders include Family Building Society, the trading name of National Counties Building Society, which specialises in products that are more flexible than those offered by mainstream lenders.
Keith Barber, director of business development at Family Building Society, says there has been a rise in applications following the announcement of a stamp duty holiday until 31 March 2021.
“Over the summer, we saw increased business from borrowers whose mortgage will last beyond age 70. What we’re seeing demonstrates that stamp duty has been a key consideration in previous decisions to delay house moves and house purchases.”
Pension or work income, investments, savings and assets such as other property are taken into account by lenders when calculating how much a person can afford to pay back each month. Applicants with a strong credit history may find it easier to be accepted by lenders.
Peter Fowler, 69, took out a 20-year mortgage in early 2017 with partner Chris Beer, 74. They love their home in Cardiff, where they have been living for the past 15 years, but found it difficult to re-mortgage when the time came to renew 3.5 years ago. They thought their only option was to downsize.
“The building society we were with originally were very offhand about our situation and said we couldn’t re-mortgage. But we didn’t want to move.
Our house is close to a park and we can walk into town in 20 minutes. We didn’t want the hassle and cost of moving and downsizing. We had a relatively large mortgage that we needed to reduce but nobody was interested because we were in our sixties,” says Fowler.
A friend recommended financial adviser, Nigel Grice, who negotiated a deal with Surrey-based lender Family Building Society.
The interest rate on the 20-year mortgage term is reviewed every three years. Originally, it was 3.14 per cent, reduced to 2.75 per cent when renewed earlier this year.
“We’re happy so far,” adds Fowler. “There was so much anxiety when we were looking to re-mortgage a few years ago. I used to be a university lecturer and retired at the age of 62, but I have a final salary pension which provides a steady income. We were frustrated with the lack of flexibility from major providers for older people with reasonable incomes and assets.”
For those who want to release a tax-free cash lump sum from their home and who don’t qualify for a mortgage, an option is equity
This allows homeowners to access some of the equity tied up in their home via a lifetime mortgage. Equity release products mean the borrower makes no repayments or interest payments while they are living in their home. Instead, the balance is repaid when the borrower dies or goes into care.
Clayre Bareham at Mortgage Advice Bureau adds: “Anyone considering equity release should always seek specialist advice when looking at their options as there are a range of products now available which meet differing requirements – whether that means taking a lump sum out straight away, or having the ability to take ‘withdrawals’ out over the coming years, or a mixture of the two, can be considered.”
Retirement interest-only mortgages
Another option for older borrowers could be retirement interest-only mortgages (RIOs). These types of loans are relatively new, having been launched in March 2018. They work like standard interest-only mortgages but are aimed at older borrowers.
Like traditional mortgages, they require affordability checks. However, monthly repayments are cheaper as the borrower simply needs to repay the interest each month. The mortgage balance is repaid either on death, moving into long-term care or if the property is sold.
Paying the interest each month reduces the potential for “interest roll-up”, as is the case with equity release. The downside is that borrowers run the risk of losing their home if they do not keep up with the repayments.
For those considering taking out a mortgage later in life, financial advice comparison website Unbiased says the first step should be to gather information on their finances.
“Get a statement from your pension or annuity provider to prove your long-term income. You should also check your credit score. Next, do some research about mortgages for pensioners.
You will want to compare the age limits, interest rates, term lengths, fees, eligibility criteria and flexibility options of the various products. There are comparison sites to help you see what is available, but a mortgage broker can give you access to a wide market of lenders and help you choose the one that is best for you,” its website adds.
(Story source: Inews)