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Specialist advice on mortgages for those aged over 55
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Finding The Best Over 55 Mortgage Deal For Your Circumstances
In the UK, there’s no set maximum age for applying for a mortgage. Your age is protected by The Equality Act of 2010, ensuring lenders cannot discriminate on this basis. Nonetheless, there are unique considerations that those within this age range should understand before going forward.
If you’re over the age of 55, one of the main things you should do in this situation is gather together comprehensive evidence concerning your current and future financial position. Employment, income, credit, outstanding debts and ongoing expenses – all of these will prove to be instrumental in reassuring lenders of your ability to repay.
We understand that this can be a little overwhelming, especially if your income comes from non-standard income streams, which is why we encourage you to give us a call to speak if you’re over 55 thinking of getting a mortgage.
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Are there specific mortgages for people over 55?
Yes, there are specific types of mortgages for people who are aged 55 or over.
- Lifetime mortgages – This is a financial option that allows you to borrow money against the value of your home. You still own it and can use a portion of its value to attain a loan. The money, plus interest building up, is repaid when you’re ready to sell the house, either after you pass away or if you move on into long-term care facilities.
- Home reversion plans – This is a form of equity release that allows you to sell a portion, or all, of your property to a provider for a lump sum or monthly payments. Under certain conditions, you can even continue living there.
- Retirement interest-only mortgages – Similar to interest-only mortgages, but designed for retirees. The loan is repaid when you sell your home, pass on or move into long-term care.
- Older people’s shared ownership – Tailored for people who are aged 55 and older, this is a scheme that allows you to buy a share of up to 75% of your home and pay the remaining share. At 75%, you no longer need to pay rent payments.
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When you think you’ve hit that brick wall and have all but given up hope of finding mortgage finance, When the Bank Says No are here to turn your ‘No’ into a ‘Yes’. We have access to a range of specialist lenders who are willing to help those that the High Street banks just won’t touch. Get in touch today and see how we can turn your dreams into a reality.
Pros and Cons of over 55 mortgages
Mortgages for those over 55 come with many pros and cons.
Pros
- Access to equity – Mortgages can provide access to the equity within the home. This allows your later years of retirement to be very flexible in terms of finances.
- Range of new mortgage options – A variety of new mortgage options become available at later stages in life. These include lifetime mortgages etc.
- No repayment obligation (with some mortgages)- Some mortgage options, such as lifetime mortgages, don’t require the owner to pay rent up to their move to long-term care or they pass on.
Cons
- Reduction in inheritance – Using equity-release products can significantly reduce the inheritance that you’ll leave to your heirs, should that be relevant to you.
- Accrued interest – If you choose a mortgage such as a lifetime mortgage, you may accrue interest over the years that may be difficult to repay.
- Complexity and costs – These mortgages can be highly complex. As a result, we recommend seeking out a mortgage broker to go over the fine print with, so you can create a plan to live by and simplify the process.
Potential impact on benefits – Releasing equity from your home may make you ineligible for any benefits that you are on, or are interested in getting.
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Mortgages for over 55s - FAQs
What is a Lifetime Mortgage?
A lifetime mortgage is an equity release type of mortgage primarily aimed at older homeowners. It allows the release of the value of your home in small portions, all whilst keeping you as the owner.
- Loan secured against home – The amount you are allowed to borrow is secured against the value of your home. This means it’s a long term loan that doesn’t require regular payments.
- Interest – The loan and interest accrued, whether fixed or variable, are typically repaid from the sale of the house, which occurs either on death of the owner, or their moving into full-time care. The interest can be rolled up or paid regularly.
- No negative equity guarantee – This is not a feature of all lifetime mortgages, but when it does apply, it basically means that you will never owe more than the value of the home.
- Loan amount – The amount you’re allowed to loan depends on your age and the value of the home. Generally, if you are older, you’re allowed to borrow more.
Repayment – The loan and interest accrued are typically dependent on age and value.
How does my age affect mortgage terms and interest rates?
Your age can significantly impact the terms of your mortgage and interest rates. Due to the Equality Act of 2010, you cannot dismiss a mortgage based solely on age. That being said, mortgage lenders are allowed to assess your age amongst other considerations.
- Mortgage eligibility and health – Typically when you get around 50 years old, your options begin to change. This is because lenders take retirement age and possible health conditions into consideration. Some mortgage lenders have specific age limits on when you can take out the mortgage, and also take into consideration when your mortgage may end.
- Age limits for mortgages – Many lenders have maximum age caps for taking out a mortgage. These are usually between the years of 65 and 70 at the time of taking out a new mortgage, and 80 to 85 for paying it off in full.
- Affordability assessments – Lenders are most concerned with affordability. So long as they believe you can afford the mortgage, the only other consideration is how long you will be able to keep that level of affordability. Lenders typically calculate your debt-to-income ratio to determine affordability, and then cap your loan at 3-4.5 times your annual income. The upside to this is, that by 55, your earning potential is typically much higher than when you were younger.
- Loan-to-Value considerations – LTV is the ratio of mortgage amount owed vs the value of the property. Your deposit not only secures the property for you, but it also lowers the LTV, which also, in turn, lowers monthly payments and interest.
Interest rates – Older borrowers may face higher interest rates to balance the risk of offering significant loans in later years. Again, a big part of this consideration is more the age you plan to retire and health.
How does divorce or separation affect mortgage options at 55+?
- Joint mortgage liability – Individuals over 55 with joint mortgages remain equally liable for the mortgage after separation/divorce. This means both parties continue to be responsible for repayments. Options for managing a joint mortgage include selling the property, transferring the mortgage to a single name or one party buying out the other’s share.
- Impact on future borrowing – Being part of an existing mortgage can be an issue if you plan on getting another. Lenders will take your obligations into account, and the fact of the matter is, this more than likely means that your Debt-to-Income ratio is too high.
Can I use pension income to qualify for a mortgage?
Yes, you can use your pension income to qualify for a mortgage in the UK. Pensions are seen as stable and reliable sources of income.
- Eligibility with pension income – Regardless of whether your pension is a state, employer, private or other type, they are considered a valid source of income to pay off a mortgage.
- Age limits and mortgage terms – Despite the eligibility of pension income, age is still considered, as well as how much your income brings in.
- Borrowing amounts – The amount you can borrow is up to 4.5 times your annual income, and your annual income includes your pension. Whilst this is standard, not all lenders offer this rate.
- Mortgages for pensioners – There are several types of mortgages suitable for pensioners, including equity release mortgages, and retirement interest-only mortgages. Each has different terms and suitability depending on financial situations.
Getting an over 55s mortgage
Being over 55 comes with many perks, especially given you’ve probably worked hard to this point, and are hopefully well set up financially. If you find you need a mortgage, your age doesn’t have to be a barrier to achieving that.
Whether you have enough evidence of your current and future income, or you have may had some issues with poor credit in the past that will make lender reluctant to lend to you, our advisors can guide you so that the right over 55 mortgage deal is still a real possibility.,
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We found WTBSN after landing in a really tricky situation. We were out of term on our current mortgage and our existing broker had exhausted all options to re-mortgage due to the complex nature of our holiday let property (Grade II listed, timber frame construction and above commercial). Working under considerable time pressure due to the financial penalties being imposed by the existing lender, Brian was relentless in his search for a solution that would allow us to refinance a property that was on face value mortgageable. Thankfully, he didn’t give up and nine months later, we completed on the re-finance. We feel so fortunate to have found WTBSN and would like to thank Brian and the team sincerely for going the extra mile. We couldn’t have done it without you!
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