With an ageing population, the UK is seeing a rising demand for mortgages for older borrowers. As a large proportion of older people own their own homes, it may be time for them to look at the mortgage options available to over-60s.
Find out if you are eligible for a lifetime mortgage
Can I get a mortgage at 60?
It is possible to get a mortgage at 60 or older but your options may be more limited than for younger borrowers. Although there is no legal maximum age, many lenders do choose to impose one and this age limit could be as low as 65 years old.
While it can be more difficult to get traditional mortgages for over-60s, a lifetime mortgage, the most popular type of equity release product, is specifically designed for older borrowers. There is no maximum age limit for a lifetime mortgage, although the minimum age required is 55, meaning it can be a helpful mortgage option for older borrowers.
Why is it harder to get mortgages for over-60s?
For some mortgages for older borrowers, you will have to pass affordability checks to get one and prove that you can pay off the mortgage by the end of its term. It can be harder to pass these checks in retirement because your income is likely to be reduced.
Types of mortgages for over-60s
There are a number of types of mortgages for which over-60s may be eligible. The product that is right for you will depend on factors such as whether you can afford to make payments and when you are able to pay back the mortgage.
The types of mortgages for over-60s include:
Retirement Interest-Only Mortgages
A Retirement Interest-Only Mortgage (RIO) has a minimum age requirement of 50. Some lenders might have higher age requirements. It allows you to borrow a tax-free cash lump sum, with the requirement to pay off only the interest each month. Because monthly payments are required, you will need to pass affordability checks to determine if you can get one. The amount borrowed is due to be paid back only when the last surviving homeowner passes away or enters long-term care.
Standard mortgage (residential)
With this traditional type of mortgage, you are required to make payments each month and products range from capital repayment to interest-onlyand sometimes a mixture of the two. This can be a suitable option for those still in employment or with a guaranteed source of income in retirement.
Each lender is likely to have its own rules on over-60s mortgages. For example, terms may be shorter and monthly repayments higher. Some lenders may have specific products aimed at people over the age of 60. Think carefully before securing other debts against your home. Do note that your home may be repossessed if you do not keep up repayments on your mortgage.
Equity release:
Equity release is a form of mortgaging or remortgaging in which homeowners borrow from their homes by taking out a tax-free cash lump sum. There are two main types:
Use this calculator to discover how much tax-free cash you could release with a lifetime mortgage
- Home reversionA home reversion plan is one type of equity release. It involves selling some or all of your home to a provider in exchange for a tax-free cash lump sum. You will have the right to remain there, rent-free, until you pass away or enter long-term care. When your home is sold, the provider will take the percentage agreed from the value of the sale.
- Lifetime mortgageA lifetime mortgage is a type of equity release that involves taking a tax-free cash lump sum from the value of your home. Lifetime mortgages are the UK’s most popular equity release product as, unlike a home reversion plan, they ensure that you retain full ownership of your home.
Bear in mind that taking money out of your property now will reduce the value of your estate and could affect your entitlement to means-tested benefits. Always seek equity release advice before making a decision. A qualified adviser can explain how equity release works and offer guidance based on your circ*mstances.
What is a lifetime mortgage for over-60s?
Lifetime mortgages have a minimum age requirement of 55. The sum borrowed, plus accrued interest, is repaid either upon your death or when you enter long-term care, often through the sale of the house.
A lifetime mortgage can come with a fixed interest rate and interest accrues on the loan on a compound basis. There is no requirement to make regular repayments, but if you opt for this type of mortgage, you will enjoy the freedom of being able to choose whether or not to make payments in your lifetime.
If you don’t make any payments, you only pay off the ‘rolled up’ debt when the property is sold. An adviser can help explain equity release interest rates and the different voluntary repayment options.
Lifetime mortgages from lenders who are approved by the Equity Release Council come with a no-negative-equity guarantee, which means that even if house prices drop you will never owe more than the value of your home.
Carlton Hood commented:
“Lifetime mortgages are an increasingly flexible part of smart financial planning. For the over-55 homeowner with equity sitting unused in the bricks and mortar of their home, it can be offer a lifeline”.
How to get a mortgage if you’re over 60
Making sure that you are fully informed is key if you are considering an over-60 mortgage. Think about exactly why you want a mortgage and ensure that you research all of the solutions that might help you achieve your objectives.
The Telegraph Media Group Equity Release Service, provided by Responsible Equity Release, can provide more information about the different options available to you.
If you are considering a lifetime mortgage, it is important to get an estimate of the amount of tax-free cash you could release. You can do this by using the free lifetime mortgage calculator on this page. By using the calculator, you will also receive a 24-page guide with more information and will be put in contact with Responsible’s Information Team. They can answer any questions you may have and book you an appointment with one of their fully qualified advisers.
You must also seek advice before proceeding with a mortgage for over-60s. Responsible’s expert advisers are specialists in all of the options available when it comes to mortgages for older borrowers, so they will only recommend a lifetime mortgage if it is the most suitable.
How to improve your chances of getting a mortgage over 60
If you’re over 60, mortgages can seem out of reach as lender criteria can be strict. However, there are a few things you can check that will help you to improve your chances:
- Get your paperwork in orderPreparing proof of your pension and other sources of income will help you demonstrate that you can cover what you would owe if you choose a mortgage with required monthly payments.
- Check your credit scoreHaving a better credit score will mean that there are more products and rates on offer to you, so make sure you do what you can to boost it.
- Ensure that your home is in good condition A lender will usually conduct a survey on your home to check it is suitable. Keeping on top of things now will help to prevent any delays later on in the application process.
Learn more about lifetime mortgages for over-60s
If you are over 60 and interested in a lifetime mortgage, you can discover how much tax-free cash you might be able to release from your home using the equity release calculator on this page.
Try the free equity release calculator and find out today how much tax-free cash you could release.
By consolidating your debts into a mortgage, you may be required to pay more over the entire term than you would with your existing debt.
Read more:
- How long does equity release take?
- What if I can't pay off my interest-only mortgage?
- How to pay off a mortgage early with equity release?
The Telegraph Equity Release Service is provided by Responsible Equity Release. Responsible Equity Release is a trading style of Responsible Life Limited. Responsible Life Limited is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register (https://register.fca.org.uk/) under reference 610205. Only if you choose to proceed and your case completes will Responsible Life Limited charge an advice fee, currently not exceeding £1,690.
The above article was created for Telegraph Financial Solutions, a member of The Telegraph Media Group. For more information on Telegraph Financial Solutions click here.
Information correct at date of publication.
