In the current uncertain world, with growing costs and inflation, many people are facing the prospect of working into their later years and still need a mortgage past the age of 65. Once this might have been an impossible task but now, thankfully, this is no longer the case.
What’s Maximum Mortgage Age?
Lenders have different limits but generally you can still apply for a mortgage between the ages of 65 to 80 with that mortgage completing by the time you are 70 to 85. Some lenders don’t have any maximum and if opting for equity release you don’t have maximum age limits.
Types of Mortgages
You should be able to choose from either a standard mortgage (repayment), an interest only mortgage, an Equity Release mortgage or a retirement interest only mortgage. We always recommend that you discuss your options with a mortgage and equity release specialist who will help you decide on the most suitable mortgage for you based on your individual circumstances.
How do the types of mortgages work?
Traditional Mortgage – These used to end at retirement (usually age 65 in line with state pension age) This was to ensure that anyone repaying a mortgage / debt wouldn’t have to continue making the repayments on a significantly reduced income on reaching retirement. Thankfully that’s no longer the case as many of us will need to work long past our anticipated retirement ages due to the reduction in state benefits and the delay to receive the state pension. Many lenders now set their maximum age limit as 70 and in some cases 80! So it should be possible to be accepted for a new mortgage after the age of 65 (albeit with a shorter term). You will still need to prove affordability, so be prepared to jump through a few hoops!
Age restrictions still apply, so the final decision to lend will always be at the lender’s discretion; furthermore, due to the increased risk of lending to an older borrower, the term of the mortgage will often be decided accordingly.
Despite the restrictions it’s still possible to secure a mortgage as an older borrower, but if this doesn’t seem appropriate – if you’re planning to retire and won’t have the available income to cover the repayments, for example – other options may be more suitable.
Equity Release – this is a form of later life lending that allows you to release some of the equity built up in your home as a tax-free lump sum (or if you opt for a drawdown plan either smaller amounts as and when you need them or regular payments). Interest is charged on the amount released, but unlike with a traditional mortgage, there aren’t any repayments to make during your lifetime unless you choose to make them, which could make this form of borrowing particularly suitable for those who will have a limited income in retirement.
Your equity release provider will decide how much to lend you based on several factors, including your age, the value of your property, and even your medical history. In some cases, certain medical conditions can mean they’re able to lend you more than with a standard plan, and it’s worth bearing in mind that the older you are when you apply, the greater the proportion of your home’s value you can borrow. See our website for more
information – www.bdequityrelease.co.uk
A retirement interest-only (RIO) mortgage is a relatively new product available to older borrowers. It is similar to a standard interest only mortgage in that you only have to repay the interest for the term of the mortgage, making it a lot more affordable for those on a reduced pension income. It’s often used as a way to repay an existing interest-only loan, making it a great option for those who don’t have another way to repay the capital. A RIO mortgage is often thought of as a halfway house between a standard mortgage and equity release. The affordability criteria will be easier to meet with a RIO mortgage than a standard repayment one, yet regular payments are still made, meaning that only the capital has to be repaid at the end of the mortgage term.
This can be achieved on the sale of the property such as downsizing or the borrower goes into long-term care or passes away or even switching to a full equity release mortgage.
Why might you still need or want a mortgage?
There are any number of reasons that you might still want a mortgage in retirement. You might have a mortgage that needs to be paid off as its reached the end of its term or it could also be because you want to give your finances a boost by releasing some of the equity built up in your home, in which case a lifetime mortgage may be more suitable. Once released, you’re free to spend the money as you wish, be it to supplement your income, make home improvements, or even give an early inheritance to your loved ones.
Speak to an Independent Mortgage broker
Mortgage brokers remove a lot of the paperwork and hassle of getting a mortgage, as well as helping you access exclusive products and rates that aren’t available to the public. Mortgage brokers are regulated by the Financial Conduct Authority (FCA) and are required to pass specific qualifications before they can give you advice.
If you need help or advice with your Investment planning please contact me, Claire Blake on 07767 308783 or claire@blakefinancialplanning.co.uk or https://bdfinancial.co.uk.
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