Can Pensioners Get A Mortgage?.

There are many reasons why pensioners consider getting a mortgage, from buying a new home to releasing equity for additional retirement income. So, can pensioners get a mortgage? The short answer is yes, they can! However, for most older borrowers and retirees, there’s quite a bit you need to know before you can explore all your options. 

This is where our mortgage advisors and specialists come in. We’ve crafted a guide to help you understand everything there is to know about mortgages for pensioners. If you’re ready to get started on applying for a mortgage as a pensioner, then you can work with When The Bank Says No, so you can get in front of an experienced mortgage broker who can provide expert advice.

Can A Pensioner Get A Mortgage?

The answer is a resounding yes. As with most borrowers, one of the most important factors is your ability to repay the loan, not your age.

Many mortgage providers acknowledge that average life expectancy is rising in the country. Moreover, older borrowers can have countless reasons why they want to get a mortgage at this stage. From second homes to first-time buyers, the reason for buying can be endless, and all mortgage providers will be interested in what those reasons are for you. With that said, you have to know that while it’s still possible to get a mortgage as a pensioner, your pool of choices for mortgage providers is more limited.

However, don’t let that get in the way of securing a mortgage. Whether it’s for your forever home or the refinement of your current home, we have a team of professional mortgage advisors to help you figure out the process and make the best step. Not only do we have expert advice, but we also have connections with specialist mortgage lenders, meaning your options with us are various.

How To Get Mortgages for Pensioners

Unfortunately, getting a mortgage as a pensioner is challenging because lenders will typically require a constant stream of monthly income. You must prove that your financial situation is stable enough to repay the loan on time.

However, successfully getting a mortgage isn’t impossible for older borrowers, retirees, and pensioners!

1. Prepare Financial Records

First and foremost, you have to come prepared. Be ready to show proof of steady income—in this case, your pension income. You can provide bank statements or your pension income forecast if you aren’t retired or currently withdrawing from your pension funds.

You’ll also need to prepare all the documents required for all types of borrowers. This can include but isn’t limited to, documents related to your identity and address.

2. Check Your Credit Limit

Lenders will still look for a good credit history, even if you’re a pensioner. So, keep your credit score in mind and try to improve it before you decide to get a mortgage. You want to show lenders that you’re not a risky borrower. 

A good credit score means you have a higher chance of an approved mortgage and other financial opportunities. It can also determine how great your mortgage terms and interests are.

3. Know The Age Limits

You must ensure that you can pay off the loan before you reach the lender’s age cap if they have any. If a lender has a set age limit, you have to see to it that by the end of the mortgage term, you haven’t reached that maximum age cap yet.

For example, say your chosen lender has a maximum age limit of 75. If you’re currently 65 years old, you’d need to take out a 10-year mortgage or an even shorter period.

However, some lenders don’t have age limits at all! Be sure to go over these details and check their set policies.

4. Work With A Mortgage Advisor Or Specialist

While getting a mortgage as a pensioner isn’t impossible, the process can get quite complex. This is why getting a mortgage advisor can help make the burden lighter. With someone more knowledgeable on board, you don’t have to do everything alone.

When you work with a mortgage specialist, they can give you professional insights on how to find a deal that’s right for you. 

Here at When The Bank Says No, we have a team of advisors that can assist you as you navigate this entire process and help you find the perfect mortgage deal for your circumstances. 

What Mortgage Options Are Available For Pensioners?

There are many mortgage options available for pensioners. Lenders have specifically designed these options for older borrowers. 

Let’s explore each of these options. 

Equity Release

An Equity Release scheme allows pensioners and older borrowers to get a certain amount of money based on the total market value of their home. This is helpful for retirees who may need to make big purchases later in life.

Sometimes, Equity Release is a viable option to afford costly long-term care. The two popular types of equity release are the lifetime mortgage and the home reversion. 

Lifetime Mortgages for pensioners

With this type of Equity Release, you’re given a certain amount of money through a mortgage. Your property’s total market value plays a vital role in determining how much you can borrow.

This loan will be paid off when you pass away, move into long-term care, or when the house is sold.

One of the biggest cons of this type of mortgage is that interest can compound. With interest roll-up, you can end up paying way more than what you initially borrowed.

Some lenders allow plans with lesser interest or a larger lump sum for those with serious health conditions. Make sure you talk to your lender and your mortgage advisor about the possibility of these options.

Home Reversion

A Home Reversion plan involves exchanging a part—or the entirety—of your home for a lump sum or as income. An equity release provider will give you a certain amount for your house while providing lifelong tenancy rights.

The major difference between selling your house in the open market is that with equity release, you can continue to live in your home as long as you maintain it. This type of scheme gives you funds to live a comfortable life and a home to live in while you do.

Regardless of what type of Equity Release you apply for, we highly suggest seeking professional financial advice first. Unlike most of the other options in this list, Equity Release plans usually have heavier implications related to tax and inheritance.

For example, with this type of mortgage, you will no longer be selling your house at its full market value. You might be thinking, “Well, if I sell it in the open market for a higher price, I wouldn’t be able to live in it like in an Equity Release plan!”

While that’s correct, you still need to consult with a financial advisor because you might be losing more money than it’s worth! This can also heavily affect how your inheritance will work after you pass away.

Some other specific risks depend on the scheme you choose and those outlined by your equity release provider. 

Retirement Interest-Only Mortgages (RIO)

Retirement interest-only mortgages (RIO) work similarly to a standard interest-only mortgage. However, Retirement Interest Only mortgages are made specifically for older borrowers, like retirees. This is because, unlike standard interest-only mortgages, the lender is taking into account your age. Because of this, lenders will typically only ask for proof that you can pay the monthly interest repayments.

Another key difference is the three ways to pay off the loan: when you move into long-term care, pass away, or sell the property. 

Many benefits come with RIO mortgages, especially for pensioners with limited funds. Below are three of the top advantages.

• Payments are usually lower than standard mortgages because you’re only paying based on the monthly interest, not the loan capital.

• You don’t have to worry about the interest rising over time.  

• As long as you can afford the monthly interest repayments, you won’t have to sell your house while you’re still living.

One of the biggest downsides is that your family members won’t inherit your properties because they have to be sold. Money from the sale will be used to pay off the outstanding capital of the loan.

Because this option is made specifically for pensioners, the amount that they’re qualified to borrow is heavily dependent on their retirement income.

Older People’s Shared Ownership (OPSO)

This is another option that’s geared toward older borrowers. It follows the scheme of Shared Ownership in that you can buy an initial share of your home if you can’t afford the entire deposit and monthly mortgage payments. In this mortgage option, buying more shares means paying less rent. 

The key difference between OPSO and a standard Shared Ownership is that you can only buy a maximum of 75% of your home’s market value. Purchased shares usually range between 25% to 75%.

When you already own the maximum allowable share, the remaining 25% no longer has payable rent. This mortgage option allows older borrowers to do a process called “staircasing” where you buy more shares when you can already afford them.

Aside from being 55 years old and over, you can apply for OPSO if you qualify for the following criteria outlined on the Own Your Home government website:

• An annual household income of £80,000 or less outside of London.

• A household earning £90,000 or less if you live in London. 

• You’re a first-time buyer who can no longer afford to purchase a home now.

• You’re already a shared owner looking for a new home to move into. 

Home Ownership For People With Long-Term Disabilities (HOLD)

Home Ownership for People With Long-Term Disabilities (HOLD) mortgages, as the name suggests, are for aspiring homeowners with long-term disabilities. 

Often, those who opt for this type of mortgage can’t find a Shared Ownership scheme that works for them.

HOLD operates similarly to OPSO in that you can purchase a share of a home anywhere between 10% to 75%. The remaining shares will be paid as rent to housing providers.

The rent you have to pay depends on the remaining shares, but you can also do “staircasing” to gradually buy more and pay rent in lesser amounts until you reach 75%.

Furthermore, homes under HOLD mortgages are usually purchased on the open market. This means it may not qualify for some of the terms outlined in the new model for Shared Ownership. 

Specifically, housing providers don’t have to cover the costs for your home’s essential maintenance and repairs within 10 years. This is because some houses in the open market are over 10 years old already.

Other Options

There are other mortgage options aside from those outlined above. 

For instance, you can opt for joint mortgages with family members to combine your pension with other sources of income. 

This can help prove that you can make the monthly repayments successfully if the bank doesn’t think that your pension pot can cover it.

Another option is remortgaging. This is typically for those who no longer find their current mortgage financially beneficial. Applying for this successfully allows you to switch to a new deal or a completely different lender.

Similar to regular borrowers, pensioners are also permitted to take out Buy to Let mortgages (BTL) as long as they qualify for it. Since this type of mortgage involves an investment property, the rental income is more important to lenders.

BTL mortgages usually fall into the interest-only mortgage category, so older borrowers are welcome to apply for them.

All of these options and more can be explored with your mortgage advisor. Explore each one and see which type you’d like to take out.

Mortgages For Pensioners FAQs

1. Is there a maximum age limit for mortgages?

More and more lenders are removing their age limits for older borrowers who want to get a mortgage. 

However, there are mortgage lenders that still apply an age cap for all borrowers. This can range anywhere from 65 up to 95 years old. The specifics are highly dependent on the lender.

Ideally, with the right financial conditions and the guidance of mortgage advisors and specialists, you can find the perfect option, regardless of your age. If you’re looking for help, our team would be glad to be of service!

2. Why is it harder to get a mortgage when I’m over 65?

A common notion is that retirees or pensioners have a significantly lesser stream of income because they’re no longer working. This is one of the biggest reasons why it’s more challenging to get a mortgage at this age.

While it’s possible to increase that stream of income, by starting a business, for example, it can be a bit harder because of old age.

Additionally, some lenders set a maximum age for borrowers. This limits the mortgage options available to you and the pool of lenders you can choose from. If there’s an age cap, you’d typically need to opt for a shorter term with higher monthly payments.

3. Can I still get a mortgage if I’m retired?

Yes! As long as you can show lenders enough proof that you can make the monthly payments, you should be able to get a mortgage during retirement.

Some factors that can make this process a bit easier would be proof of any retirement income or pension pot. You can also provide other sources of your income during retirement, such as investments or businesses.

4. Is there a minimum I need to borrow as a pensioner?

It depends on the type of mortgage you’re applying for and the lender. Some types, like a retirement interest-only mortgage, will normally have a minimum of £10,000. 

You can still find lenders that will let you borrow less than this, but they’re going to be harder to find. Tell your mortgage advisor about any preferences or if you’re planning to borrow a specific amount so you can look at all the possible options for lenders.

Can Pensioners Get A Mortgage Summary

So, can pensioners get a mortgage? The answer is yes! As life expectancy continues to rise, lenders have become more open to the idea of extending mortgage options to older borrowers, and that includes pensioners.

Before anything, you’d typically want to look over your finances and know what mortgage options you can choose from with what you have.

Thinking of getting a mortgage as a pensioner? You can talk to our mortgage advisors to help you through the entire journey, from the costs to the intricate details of the process.