Securing a mortgage past the age of 65 or 70 can be quite a difficult task. While it will vary by lender, even if you have enough income to support mortgage repayments at the time of application, you may still be declined with the expectation that when you retire, your income won’t remain the same. But all hope is not lost — there are ways to borrow during retirement.
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
Challenges to getting approved
You might be able to find success in securing a mortgage with a smaller lender, as they are more likely to approve loans for people later on in life, but for many borrowers, there will still be challenges getting approved, even if you will still be earning during retirement. Of course, it will depend on a variety of factors, including your current age and anticipated retirement age. You might also be subject to terms different from a traditional mortgage, such as shorter repayment period or increased payments toward the end of the life of the loan to ensure repayment.
Other borrowing options
There are alternatives if you are finding it hard to secure a mortgage during retirement. One option to look into is a retirement interest-only mortgage. These kinds of mortgages are specifically designed for older borrowers who are having trouble getting approved by mainstream lenders because of their age. Retirement interest-only mortgages don’t require the same affordability tests as traditional mortgages so you only need to prove that you can cover the interest payments during the loan and not the total capital amount that you borrowed.
Equity Release options
Another option to explore is equity release in the form of a lifetime mortgage. It can be an expensive option, but since these loans come with high interest rates, you only have to pay back what you’ve borrowed until you sell your home.
Improving your chances of approval
Even if you’re in your fifties or older, if you’re looking to secure a mortgage, you can improve your chances with a few simple steps. First and foremost, being prepared with a plan for paying back the loan over time and knowing what your monthly budget will allow will go a long way toward winning approval.
As usual, knowing your credit score and taking action to improve it before applying will help as well. It’s especially crucial for those over 50 to show proof of income and how it will fluctuate throughout the life of the loan so your lender can be assured that you won’t miss your repayments. A statement with your projected retirement income should suffice, and your other expenses will be taken into consideration too.
Some lenders will take into account any possible post-retirement loss of income, or they could have an upper age limit for terms, meaning that depending on your age, you might not be able to secure the desired term for the mortgage. If you can’t port your mortgage, you might be looking at early repayment charges.
It’s important to not let early mortgage application rejections get you down, there are many avenues to consider from both mainstream and specialised lenders, but speaking with a mortgage adviser is a great way to improve your chances of securing a mortgage close to or during retirement.
Considering borrowing during retirement?
Your retirement age shouldn’t also be the age limit on borrowing. If you’re considering buying a home during retirement and need assistance navigating the tricky waters, Dental & Medical Financial Services can help. To find out more about how we can be of assistance during the mortgage process, get in contact today.