With more of us living and working longer, many banks and building societies are adapting their mortgage products to ensure that older borrowers can still apply for a home loan.
Figures from the Office for National Statistics show there were more than 600,000 people aged 90 years and over in 2019, and 13,330 centenarians (those aged 100 and over). This was up 3.6% and 11% respectively from 2018.
Lenders are recognising this rise in life expectancy and, whereas once you may have only been able to apply for a mortgage if you were under 65-70, many lenders now allow you to apply if you’re 70, 75, 80 or in some cases, even older.
There are many reasons why you might want to buy a new property or remortgage in your 70s. You might be looking to buy a home closer to family, you might be downsizing, or your existing mortgage deal may have simply come to an end.
Alternatively, if you’ve built up a lot of equity in your home, you might want to release some of this to give your finances a cash boost. You can do this by applying for a lifetime mortgage which will provide you with a tax-free cash sum which you can then spend on whatever you want.
Some mortgage lenders have no maximum age limit at all. But others have a maximum limit for both your age at application and your age at the end of the term.
For example, some lenders might be prepared to lend up to the age of 65, providing you have repaid the mortgage by the age of 70, while others might accept applications up to the age of 80, so long as you have paid off the mortgage by the age of 85.
Lenders set these age limits as they need to be sure you would still be able to afford to repay your mortgage in retirement. While most mortgage terms tend to be around 25 years, older borrowers will have to settle for a shorter term (usually no longer than 10 years) and higher monthly repayments.
To take out a mortgage, you’ll usually need to provide proof of ID, such as a passport, and proof of address, such as a utility bill or council tax bill. In addition, you’ll need to provide evidence that you can afford to meet the monthly mortgage repayments.
For example, you might need to provide:
A guarantor mortgage is one in which a close family member or friend agrees to assume responsibility for a mortgage should the borrower become unable to repay it. A guarantor often uses their own home as security for the borrower’s mortgage.
You should begin the process of finding the ideal over-70s mortgage by thinking about how much you need to borrow. Then, once you’ve crunched the numbers, decide if you want a fixed or variable interest rate and for how long you want the mortgage to last. With these details sorted out, you’ll be able to compare mortgages effectively and efficiently.
Many mortgage lenders have upped their maximum age limit so that it is possible to take out a standard mortgage when you’re over 70.
That said, you may not have as many mortgage options to choose from compared to younger borrowers, so you may want to seek the advice of a specialist broker to help you find the right mortgage for your needs.
With a standard mortgage you can usually choose from a repayment mortgage or an interest only mortgage. If you choose a repayment mortgage, you’ll pay back a portion of the amount borrowed plus interest each month until you’ve paid off the mortgage in full.
With an interest-only mortgage, you only pay back the interest each month. At the end of the mortgage term, you’ll then need to make a lump sum payment to clear the capital borrowed.
You can also choose between a fixed rate mortgage and a variable rate mortgage. Fixed rate deals can be good for those on a budget as the interest rate remains the same for the length of the deal – typically two, three or five years.
In comparison, the interest rate on a variable rate deal can fluctuate. Often the rate is linked to the Bank of England base rate so if that increases, so will your mortgage rate and your monthly payments. However, if the base rate falls, your mortgage rate will also come down and your monthly payments will be lower.
If you need extra cash and you’d like to release some of the wealth built up in your property without selling your home, equity release could be right for you.
One form of equity release is a lifetime mortgage. This is effectively a loan against the value of your home which does not need to be repaid until you move into long term care or die. Interest will be added but there are no monthly payments, unless you choose to make them. You can usually receive your cash as either a lump sum or in smaller, regular payments. The amount borrowed is then repaid when your home is sold. You won’t need to prove affordability with this option as the mortgage won’t need to be paid in your lifetime.
Another form of equity release is a home reversion plan, but with this option you agree to sell all or part of your home to an equity release provider in return for a lump sum or regular payment. You will be able to stay in your home until you die or go into long term care.
Retirement interest-only (RIO) mortgages are also available to older borrowers and are half way between a standard mortgage and equity release. They work in a similar way to standard interest-only mortgages as you only repay the interest each month, not the capital.
However, like equity release, a ROI mortgage is only repaid when you move into long-term care or die and your property is sold. For this reason, ROI mortgages can be easier to get accepted for than standard interest-only mortgages.
As well as income from an employer or your own business (if you are still working), many lenders will also take certain government benefits into account to help assess affordability when you apply for a mortgage. These could include:
On top of this, pension income and investment dividends will also count as income on your mortgage application. If you are planning to rent out a room in your home and use the government’s Rent a Room scheme, some lenders may also include this income when they assess your affordability (others won’t, so be sure to check).
The same applies if you are also a landlord of another property. Depending on the lender, you may be able to use your rental income as an additional income source. However, some lenders will view your buy-to-let mortgage as added risk.
Getting a mortgage in your 70s may not be as easy as it was when you were younger. But there are still options available to you, particularly if you can prove you can afford the loan and you have a good credit history. Approaching a specialist broker can also ensure you find the right deal for your circumstances.
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