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Michelle is an award-winning chartered financial planner who holds the designation 'Fellow of the PFS' demonstrating her commitment to maintaining the highest standards of knowledge, ethical conduct, and professional practice. Michelle is also an accredited member of the Society of Later Life advisers. Michelle offers a fully personalised service tailored to each clients individual needs and goals, using an approach that was recognised and honoured by the Women in Financial Advice awards in 2021. Clients working with Michelle can expect a high level of professionalism, integrity and a lasting relationship built on trust and open communication
Michelle Boakes
Chartered Financial Planner
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What are the mortgage options available for older borrowers in the UK?
There are a few mortgage options for older borrowers. You’ve got your traditional mortgage, which is the same for everybody in the UK, but you’ve also got Retirement Interest Only and equity release mortgages as well. These can also be known as lifetime mortgages.
How does age affect the mortgage approval process for older borrowers?
The majority of the traditional mortgages are going to be based on affordability, that is, how well your income supports the mortgage payments both now and in the future. Most mortgage lenders will consider a maximum retirement age up to around 75, although some will set this lower and some higher.
You’ll need to have a mortgage term that doesn’t exceed this maximum age. The closer you are to 75, the shorter your mortgage term will be – therefore the higher your mortgage payments.
The lender will also consider whether your job role is sustainable to 75. If it’s not, they’re going to be asking questions about your plans around income as you approach that age. These criteria will affect both monthly mortgage payments and the amount that you can borrow.
What are the eligibility criteria for obtaining a mortgage as an old borrower?
All lenders have rules about what they will and won’t accept for mortgage purposes – it’s called their lending criteria.
Most lenders have criteria around the maximum age of an applicant at application and at the end of their mortgage term. Some will also have criteria around a person’s maximum retirement age. This will affect older borrowers, who sometimes can’t obtain a mortgage because they’re exceeding the lenders’ accepted age limit or because the lender insists on a shorter length mortgage, making the payments unaffordable.
For retirement interest only mortgages, you’ll need to be able to show that your pension income is sufficient to maintain the mortgage throughout your life. On a joint mortgage, some lenders will also assess the ability for one borrower to pay the mortgage in the event of the other borrower’s death. There is no end date for retirement interest only mortgages, and you do need to be over 55 to access them.
In the case of equity release products like lifetime mortgages, the approval is heavily dependent on the property being acceptable to the lender. This is because there are no monthly repayments. If you do choose a mortgage with monthly repayments, you’ll have to undergo the same affordability checks.
Are there any specific mortgage products tailored to meet the needs of older borrowers?
Retirement interest only mortgages and lifetime mortgages were specifically designed and only available to the older borrower. I can also think of at least one traditional mortgage lender that has created mortgage products specifically for the older borrower.
We offer fee free mortgage advice.
We do not charge our customers for any mortgage advice we are purely paid by the lender on completion.
What is the maximum age limit for mortgage applications in the UK?
There isn’t an overall maximum age limit for applications in the UK. There are lots of different maximum age limits for each individual lender – it also depends on the kind of mortgage we’re considering. The other day I was looking at a mortgage for a client who was 97.
Are there any additional requirements or criteria for older borrowers?
In my experience there aren’t additional criteria for older people, but lending criteria around maximum ages and retirement ages will affect older people more. Older people may find that they need to provide more information about their pensions when they’re applying for a mortgage.
How does the lender assess the affordability of a mortgage for older borrowers?
It’s the same assessment for everybody, but an older person is likely to be more affected, because they will usually have a shorter time in which their income is deemed to be usable for the mortgage.
With a retirement interest only mortgage, affordability is based purely on income available throughout retirement – your pension income. Maybe you’ll rely on income from a second property.
A lifetime mortgage has no monthly payments, and with a ‘gross rollup’ lifetime mortgage there is no affordability assessment.
What are the key differences between traditional mortgages and mortgages for older borrowers?
The key difference is normally the term and the age restriction. A traditional mortgage is available from the age of 18, whereas your retirement interest only and lifetime mortgages are only available to people over 55.
Retirement interest only and lifetime mortgages have no end date, whereas a traditional mortgage has a term of a set number of years before it must be repaid.
Can older borrowers still get a mortgage if they are retired?
Yes, absolutely. Borrowers can still get a mortgage if they’re retired, and it is really important to consider all three options and the pros and cons of each before you make a decision about the right mortgage for you.
Is it possible for older borrowers to obtain a mortgage with no income or a reduced income?
Yes, but I would strongly recommend that you consider all three mortgage options before making a decision. If you don’t have any income for an affordability assessment you might lean towards a lifetime mortgage. But always seek advice and go through all your options before making a decision.
We work with dozens of lenders including the high street banks and can compare their deals for you, always with your best interest at heart.
What documentation is required for mortgage applications as an older borrower?
It really does depend on the lender. All traditional mortgages require at least three months’ proof of income and three months proof of expenditure – i.e. your bank statements.
There may be other documentation such as proof of your pension funds. The exception to this is with a lifetime mortgage which does not require proof of income if you’re not making monthly payments. There’s very little in the way of documentation.
What factors should older borrowers consider when choosing a mortgage term?
There are lots of factors that all borrowers should consider when it comes to taking out a mortgage. In relation to the mortgage term, an older borrower should consider their age and retirement plans.
Will you want to reduce your working hours or take a lower pay position with less responsibility? When do you want to retire entirely from work? Your mortgage term needs to align with these plans.
You should also assess the stability of your income. Can you afford the mortgage payments now and in the future, accounting for interest rate rises? How are your retirement plans looking? Do you have sufficient income in retirement with the plans you already have, or should you be considering saving more? How would that interact with your mortgage payment?
If you’ve considered an interest only option, how will the balance be repaid at the end of the term? If you’re considering retirement interest only or a lifetime mortgage, you won’t have to think about the mortgage term, but it’s sensible to consider how the balance is going to be repaid and how this affects your family.
We always recommend that you discuss your plans with your family before you go ahead with any options.
Are there any special considerations for older borrowers when it comes to interest rates?
Unfortunately not. Interest rates aren’t based on the age of the borrower – they are based on the mortgage product that’s available at the time. Each mortgage product has an interest rate available.
Lifetime mortgages or retirement interest only products are often higher in interest rate than the traditional mortgage.
How does equity release work and is it a viable option?
I can’t stress enough how much equity release has evolved since the 1990s when it got a really bad reputation.
There are two options – the first and the most common form is a lifetime mortgage where you borrow a lump sum and choose whether to make monthly interest payments or not make any payments at all.
The interest would then roll up on the amount borrowed, which does increase the balance of your loan. The mortgage is repaid when the house is sold, either on death or entering into a care home.
The other option is called home reversion, where you sell all or part of your home to the lender in exchange for lump sum or regular income. The lump sum is always much less than the house is worth, but you can carry on living in the property until you die or move into a care home.
Both are really viable options for older borrowers. They’re much better than the equity release schemes from the 90s, with much tighter regulation and a much more ethical approach from lenders.
There are a lot of pros and cons, and whether they offer the right solution for your circumstances does depend on a lot of different factors. It’s really important you consider them all before proceeding with an application.
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Are there any potential drawbacks or risks associated with mortgages for older borrowers?
There are drawbacks and risks with almost everything you do, and certainly with mortgages. The main one is that your home is at risk if you don’t keep up the repayments.
It’s strongly advisable for older borrowers to consider the risks and drawbacks in relation to their own circumstances with a suitably qualified professional before making a decision.
I’m a SOLLA accredited later life advisor. I have a full understanding of how mortgages and equity release can affect the other areas of your finances, particularly in relation to care fees and local authority assessments.
What steps can older borrowers take to improve their chances of mortgage approval?
Wanting to maintain a good credit rating is probably the top one, so make sure you pay your loans and bills on time. Keeping your home in good repair will also help improve your chances.
Can older borrowers still access mortgage advice and support from a financial advisor?
Yes. As an older borrower there are plenty of options available to you – but there are also many risk factors, advantages and disadvantages.
I would encourage you to look for an advisor who has an equity release qualification so that they can cover all three types of mortgage for you. I personally also think that looking for a SOLLA accredited advisor offers you the highest standard of advice – we can help you consider all drawbacks in relation to your personal circumstances, including potential future concerns.
Warning Text
Your home may be repossessed if you do not keep up with your mortgage repayments.
Equity Release, Lifetime Mortgages & Home Reversion will reduce the value of your estate and can affect your eligibility for means tested benefits.
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