Mortgages in retirement

The aim of most people with mortgages is to make sure their home loan is paid off by the time they retire. The idea of repaying a mortgage without a regular income is not an attractive option for many.

Banks tend to be wary of offering mortgages to older borrowers as they know that there is less time in terms of prime earning years for the mortgage to be repaid in.

However, there are some lenders who now offer mortgages to older borrowers and whilst few people plan to pay a mortgage at the end of their lives, for some it is a new financial reality.

Getting a Mortgage While on a Pension

Following the financial crisis of 2008 and the ensuing property slump, the government became very particular about the enforcement of responsible lending.

The kind of borrowing that had been possible during the decade of ‘cheap money’ from 1997 onwards resulted in many borrowers being over committed, in negative equity and facing repossession of their homes.

Lending from 2014 became more stringent as banks and building societies were required to conduct thorough audits of prospective borrowers’ financial means in order to vet their suitability for borrowing.

It is of course unlawful to discriminate against a borrower on the grounds of age as it would be with other kinds of discrimination; banks cannot refuse to lend because the borrower is too old.

Older lenders looking for low cost mortgages are often declined because of repayment criteria. If a lender believes that once a borrower retires their earning potential will decline then a loan is often refused.

Options For Retired Borrowers

Trying to borrow after having retired can be more challenging for many older people seeking a mortgage.

The credit market is not completely off limits to older borrowers and several lenders offer specialist mortgage products.

In many cases older borrowers are forced to find other means of financing a mortgage and these can include equity release schemes and lifetime mortgages. Both these options are more expensive than a regular mortgage.

A lot of retired people with dependents and/or grandchildren want the wealth they have accumulated throughout their lives to go to their families.

Lifetime Mortgages are a loan secured against the value of a property and they are only repaid after the homeowner passes away or has to go into long-term care.

Interest is added to the loan throughout the life of the agreement and the mortgage is repaid from the sale of the property when the borrower dies or goes into care.

For borrowers it offers a secure property for life with no obligation to repay.

For older people borrowing has become more complex in the past ten years and the options available need to be carefully considered.

There are lenders who will cater for older borrowers but it is normally a good idea to have as complete a picture of the mortgage market as possible.


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