Although some lenders set their own maximum age limits, there is no maximum age for applying for a mortgage – so yes, mortgages for pensioners do exist. The golden rule is simply the same as for any mortgage: you need to prove you can repay the loan, one way or another.
Reasons for getting a mortgage as a pensioner
When you’re retired, there are still several reasons why you might want to take out a new mortgage, or remortgage:
- Get the right home – on retirement, you may want to buy your ‘forever home’, or one that will suit your needs as you get older (e.g. fewer stairs!)
- Improve your current home – as above, except you may prefer to enlarge or adapt your existing home to meet your retirement needs (which may require extra money).
- Additional retirement income – you can use a special type of mortgage to release equity from your home to supplement your other retirement income.
- Pay off an interest-only mortgage – if you have come to the end of your interest-only mortgage term, you may need to remortgage to pay off the outstanding balance.
Do lenders have a maximum age limit for mortgages?
There is no set rule for age limits on mortgages, but lenders tend to have their own cap, some of which can be as low as 55. Lenders are trying to be more open-minded and take into account that people are now living and working for longer. Some high-street lenders will have age limits as high as 85. High-street mortgage providers tend to offer lower interest rates but they may not offer as much flexibility.
Smaller lenders, like local building societies or private banks, can offer more flexible lending criteria and some have no upper age limit at all. The interest rates may be higher, but a mortgage broker can help you access a large pot of lenders and assess your options to find the best one for you.
Is it easy for a pensioner to get a mortgage?
For most pensioners, the short answer is no. Lenders will want to know that you will have a steady income stream to make all your repayments, which can be difficult to prove if you’re over 65 and soon to be a pensioner – but it is possible. You will need to show that your pension pot or other investments will be able to fund the repayments, and it can help to provide a well-estimated retirement date.
In fact, some providers will request the current value of your pension pot. You can show them your workplace pension forecast, annuity statement or bank statement (if you’re already withdrawing from your pension).
Lenders will also want to know that you have a good credit history. It is important to check your credit score before you apply for a mortgage to see if there are any areas you can improve.
What mortgages can a pensioner get?
Some types of mortgage are aimed specifically at older people. Here are the main ones.
Retirement interest-only mortgages – these work in a similar way to standard interest-only mortgages in that you only pay the interest each month. However, you only repay the outstanding balance once you die, go into long-term care or sell the house.
Lifetime mortgage – this is a type of equity release that lets you borrow a lump sum secured against your home, which you repay when you die, move into your long-term care or sell the house. You pay interest on the amount you borrow, which will either compound over time to a lump sum you pay at the end or you may be able to pay it off as you go to avoid it increasing. Find out about the pros and cons of equity release.
Older People’s Shared Ownership (OPSO) – this government-backed scheme isn’t a traditional mortgage, but it does offer a way for pensioners to buy a home. It allows you to buy a portion of a property and pay rent on the remainder. You can only buy up to a 75 per cent share, and once you reach this threshold, you won’t pay any more rent.
Home Ownership for People with Long-Term Disabilities (HOLD) – just like OPSP, HOLD is a shared ownership scheme. It lets you apply for properties that meet your needs if there aren’t any available through OPSP.
How to get a mortgage as a pensioner
Your first step is to gather information on your 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.
You then need to apply for the mortgage you want. Try to avoid applying for lots of products as each application will appear on your credit history and could harm your credit score. Again, a mortgage broker can take you through the entire application to help ensure you are successful.