It’s a fact of life that we’re all living a lot longer, and that means we’re also working longer, sometimes far beyond the typical retirement age. Once upon a time it was normal to buy your first house when you were in your 20s and have paid it off when you retired but this isn’t as common anymore. While there’s no denying the fact it may be harder to get a mortgage when you’re over 70, they do still exist and here we show you how to get one.
A number of mortgage providers offer mortgages to those aged 70 or over. While all providers have their own lending criteria, some will lend to those up to the age of 80 and in some cases older.
Lenders recognise that we are living and working longer and have produced products to reflect this change.
In the past 15 years, for example, the number of centenarians living in the UK has increased 85 per cent, according to Age UK. While in 50 years there are predicted to be an additional 8.6 million people aged 65 and over, according to the Office for National Statistics (ONS).
One bank, Aldermore, for example offers mortgages to those who will pay the amount off by the time they reach 100. While Family Building Society allows people to pay them off until they are 95.
When the Mortgage Market Review (MMR) was introduced in 2014, lenders started to become stricter with their eligibility criteria. It meant that lenders had to assess affordability and to look at lots of different factors when doing so, including the age of the borrower. This is to stop people taking out mortgages that they won’t be able to afford to pay back when they retire. One way lenders do this is by setting a limit on age for those applying for a mortgage.
Providers usually have a limit of both the age when you can take out a mortgage, which is usually 65 - 70, or the age in which you can pay it off, usually 70 - 85. But some do go above these limits.
The usual timeframe for paying off a mortgage is 25 years, although if you’re over 70 this will be substantially shorter and the monthly payments will be higher. For example, you may be accepted for a mortgage at 70, but there could be a limit of 80 by the time you need to pay it back.
The first thing to consider, whatever your age, is the reasons for taking out a mortgage. Then you’ll need to look at what you can afford and the type of mortgage you want.
The difference if you’re over 70 is that there will be less choice available to you and the terms are likely to be more restrictive. However, there are still deals to be had so don’t let this discourage you.
Before you begin, have a think about the following factors
How much can you afford to borrow overall
What is your budget for your new home
How much can you afford in repayments each month
What source of funding are you going to use for your income and how stable is this
How would a partner or spouse pay for a mortgage if you were to die
There are 3 main types of mortgage to choose from
A standard mortgage
A Retirement Interest Only mortgage
An equity release scheme
Depending on your circumstances, it may be better to use a specialist broker rather than going directly to a lender to apply. Here we explain a little more on each of these three options.
You can choose from a repayment mortgage or an interest only mortgage. A standard repayment mortgage works by you paying back part of the loan each month along with an interest charge. As you pay it off, the overall amount falls until the mortgage has been paid off.
An interest only mortgage requires you to just make interest payments on a monthly basis.
At the end of the mortgage term you’ll be required to make a lump sum payment. These are less common for older borrowers and they will need to show proof of being able to make the final payment if they do take one out.
There is also an option over choosing a fixed rate mortgage or a variable rate mortgage. The fixed rate mortgage does what it says on the tin and you pay a fixed amount each month which doesn’t change.
If it’s a variable rate mortgage, the amount may change because it is linked to the Bank of England interest rate. Therefore, if this goes up or down, you could end up paying a different amount.
While it’s impossible to predict what will happen with the interest rate, in periods of uncertainty borrowers may choose a fixed mortgage instead for the peace of mind of always knowing how much they will have to pay.
Retirement interest only (RIO) mortgages are for older borrowers who want to release equity from their home or those who want to combine saving for retirement.
Borrowers make monthly payments towards the interest on the loan until they either die or require long-term care. When their house is sold the lump sum payment towards the mortgage is taken from this money.
There are a range of equity release schemes to choose from, including a lifetime mortgage and home reversion. They work in a similar way and allow those who already own their homes to release money from them. You can’t access them until you’re over the age of 55 and can usually take the money in a lump sum or in monthly payments.
Older lenders will need to provide the same kind of documentation as younger lenders when applying for a mortgage. However, they will also need to show that even if they’ve stopped working they can still make the monthly repayments.
Most lenders will want to see the following…
Proof of income
Details of your regular incomings and outgoings
The amount of savings you have
Any income you receive from investments or other sources
Details of a younger guarantor if you’re using one
The difference between applying for a mortgage when you’re 70 compared to when you’re younger is that your income may not be as regular. If you’ve stopped working for example, or if you become ill and need to start paying for care.
However, we’re all living and working longer these days and lenders are recognising this by adding more mortgage deals to the market.
Essentially, they want you to be able to show you have the money to make monthly payments, both now and until the mortgage is cleared.
It might be possible to have a younger guarantor, such as a child, added to your mortgage. This means if for some reason you are unable to make the repayments, they would be able to cover them.
There are lots of ways you can improve your chances of getting a new mortgage including the following:
Having a large savings pot
Keeping track of all your incomings and outgoings
Making sure you pay all regular bills and don’t miss any repayments
Having a good credit score
Showing proof of income if you’re not employed, such as from an investment
Avoiding applying for any other loans at the same time as applying for the mortgage
Stopping any unnecessary spending
Taking out a mortgage when you’re 70 or over could impact the following areas.
If you receive means-tested benefits such as pension credit, you may be eligible for Support for Mortgage Interest (SMI) which could help you pay for an interest-only mortgage.
Your estate and inheritance tax status may change if you take on a big debt later in life, through a new mortgage.
If you’re taking out a mortgage but then fall ill and need to go into a care home, you could potentially be paying for repayments and fees, depending on your financial and personal circumstances.
Once you’ve decided what kind of mortgage you are after, you’ll need to either go directly to a lender or you can use a specialist broker to find a mortgage.
The option you pick will depend on your circumstances but it’s well worth using a free mortgage repayment calculator to work out how much you’re able to borrow first.
You can also look at a comparison website to give you an idea of the kind of mortgages available, the costs, and the age limits. This is a good way to quickly see a range of different offers and is a useful starting point.
It’s always worth remembering that not all mortgage providers are the same. They set their own limits on age for mortgages so while one might you reject you because you’re 70, another could accept you.
If you’re finding it hard to find something suitable, a specialist broker may be able to give you advice.
Alternatively you could look into other options such as equity release if you already own your property.