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Your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it.
You may be able to get a mortgage if you’re over 60, although it will depend on your financial circumstances and why you are looking to borrow.
If you already own a home and want to release some of the equity in the property to help fund your retirement, there are equity release products such as home reversion and lifetime mortgages available.
But if you’re looking to purchase a new property and want to take out a traditional residential mortgage to cover the costs, your options may be more limited.
While there is no maximum age limit to get a capital and repayment mortgage in the UK, lenders may impose stricter criteria, including shorter mortgage terms and higher monthly payments.
A lifetime mortgage is a form of equity release where you borrow against the existing value of your home to fund your retirement. You either make monthly payments to cover the interest on the loan or allow the interest to ‘roll up’ so that you will eventually pay more in total. When you die or move into long-term care, the capital is paid off from the sale of the property. You must be aged 55 or over to take out a lifetime mortgage.
A home reversion plan is another type of equity release. You agree to sell an agreed percentage of your home to the plan provider in return for continuing to live there. Note that the amount you receive will be under market value because the company’s money is tied up until you either die or go into long term care. The home is then sold, and the home reversion company receives its share of the proceeds.
It may still be possible to get a standard residential mortgage if you’re aged 60 or over, providing you can meet the lender’s criteria. This will include being able to show that you have enough regular income to meet the repayments until the end of the term. The length of the mortgage is typically shorter, which also means monthly repayments tend to be higher. As with all standard residential mortgages, your home is at risk if you do not keep up with repayments.
A retirement interest-only mortgage allows you to borrow a tax-free lump sum with the requirement to only pay off the income each month. It slightly differs from a lifetime mortgage because you’ll need to prove you can afford the interest-only repayments. The capital only needs to be paid back when the last homeowner dies or goes into long-term care. This is typically done through the sale of the property. A RIO has a minimum age requirement of 50.
A fixed-rate mortgage means the interest rate is fixed and therefore you pay the same fixed repayment amount each month. The advantage of a fixed-rate mortgage is that you know how much you’ll need to pay and can budget accordingly. Most lifetime mortgages come with a fixed interest rate.
A discounted variable-rate mortgage is like a tracker mortgage, but the interest rate you pay will be pegged to the lender’s standard variable rate (SVR). While the SVR often changes after a base rate change, it depends on each lender. Your repayments can go up or down – so, make sure you can still make the repayments if rates rise.
Your chances of getting a mortgage aged 60 or over depend on the type of product you want. If you are looking for equity release, the key factor is how much equity you have in your home to borrow against.
If you want an interest-only or repayment deal for a new or existing property, you can increase your chances of getting a mortgage by:
By increasing your credit rating, you put yourself in a better position to secure the best terms for a mortgage. Steps include making sure you are on the electoral roll and checking your credit file for mistakes.
Our guide provides more tips on how to improve your credit score.
To get a standard residential mortgage, you’ll need to show the lender that you can afford repayments. Having a regular and steady income will give them the confidence you can repay what you owe.
Lenders might be more keen to accept your application if you look for a shorter loan term. While this will put up your monthly repayments, it will clear the debt more quickly before you reach your later years and wind down from work.
But repayments must still be manageable, or you may slide into more debt.
It’s harder to get a standard residential mortgage if you are aged 60 or over because lenders often take the view that your earning potential (the number of years you have left to work) is reduced. Their concerns are that you may not be in a position to keep up mortgage repayments over the long term due to declining health, for example.
There’s no financial rule to say that you cannot get a mortgage if you’re retired. However, the lender will need to be confident that you can afford the monthly repayments.
They will look at your pension income, plus any other income from savings or investments, and weigh it up against your outgoings. You may also need to borrow the money over a shorter term, which will push up the cost of monthly repayments.
The length of a standard mortgage for someone over 60 will be down to what the lender offers, but it is likely to be less than the standard 25 years on a residential mortgage.
Lifetime mortgages, where you borrow against the equity in your property, work differently. The mortgage lasts for the length of the time you live in the property before it is then recouped when the home is sold.
There is no official age limit for mortgages, but it is harder to get a standard mortgage when you near retirement. Some equity release products, where you use the value of your existing home to fund later life, have a minimum age limit. A retirement income-only product has a minimum age requirement of 50, for example.
You may be able to get a 25-year mortgage if you’re over 60. But you may also have to settle for a shorter-term mortgage, unless you can prove to the lender that you will have a means of funding the repayments into your later years.
A mortgage lender will look at all your income when it comes to approving a home loan – this includes your pension.
Therefore, it's possible to use your pension income as a way of showing you can afford a mortgage.