No money topic is too big or too small. Welcome to the Mouthy Money Podcast,…
Read More →
How easy is it to get a small mortgage close to retirement?
Our reader asks: My husband and I are looking to move into a bigger house. We have no mortgage as our home is paid off, but we’d like to move to a bigger house which we’d need around £50,000 to borrow to make the move possible. We’re both close to retiring though so would this be possible?
Steve Mannakee from West One answers: Getting a mortgage when you’re close to retirement age can be more challenging than it is for younger borrowers, but it’s certainly not impossible.
Lenders do tend to have maximum age limits for when a mortgage term should end and will closely assess how applicants intend to maintain their repayments by scrutinising pensions and other sources of retirement income.
The type of mortgage being applied for and the loan to value ratio will also be considered carefully. For some older people it may be wiser to consider equity release depending on their personal circumstances and so it’s important to take financial advice or speak to a broker to assess your options fully before making that decision.
At West One Residential Mortgages our loans work on the assumption that the applicant is 70 years old at the end of the mortgage term. However, we can still lend to a term beyond the age of 70 by assessing the applicant’s earned income. Approving a loan is possible provided the applicants occupation is one we are generally comfortable they can continue working in and receiving an income from.
Our own lending criteria means that we can consider offering a mortgage to a borrower that meets the criteria, provided it comes to the end of its term by the time that borrower is 85 years old. So, that does give plenty of scope for lending to borrowers later in life provided their circumstances are thoroughly assessed and deemed to be viable.
In many cases it can actually help with overall affordability if the term of the loan is extended beyond retirement age. Increasingly we are seeing borrowers take this option to help spread the load of repayments over a longer time horizon.
We also have the ability built into our decision process to use earned income beyond our own “assumed” standard retirement age of 70 years of age. That is providing the applicant is at least 10 years away from 70 at the point of application and has a pension in their name that is actively being contributed to.”