Later life lending: what are the mortgage options for the over 55s?

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Friday April 13, 2018

Life expectancy in the UK has grown significantly over the last few decades. Back in 1980, the typical life expectancy stood at an average of 71 years according to data from the Office for National Statistics, but today that figure is more than 79 years.

There are a host of factors behind why we are living longer, from improved understanding of nutrition and what constitutes a healthy lifestyle, to improvements in medical care.

While increasing life expectancy is a wonderful thing, it does present its own challenges, including with mortgages. With the increase in life expectancy, and people are working for longer, some mortgage lenders are still very wary about offering mortgage finance to people as they reach their later years.

Indeed, many lenders have an age cap in place of 70-75 years. In other words, they will only lend to you if you agree to clear the loan by the time you reach that age.

This has made life tricky for many older borrowers who still want to access mortgage finance.

There are plenty of different reasons they may want to do so, from looking to purchase a retirement property to wanting to unlock some of the equity they have built up in their existing property to ensure a more comfortable lifestyle in retirement.

With the growing importance of the ‘Bank of Mum and Dad’, many parents and grandparents also want to unlock some of that equity to help their children or grandchildren financially, with a property purchase of their own.

Lenders are becoming more flexible

Thankfully, this situation is changing.

Some high street lenders are becoming more flexible in the way they approach lending to people in later life and taking a more pragmatic approach when assessing individual borrowers, for example by raising the maximum age for borrowing to 89 with repayment by 94.

Certain lenders, particularly building societies, have made a virtue of appealing to older borrowers. The Building Societies Association, the trade body for mutuals, has been a vocal advocate for lenders to respond to the “silver-haired housing revolution”.

The types of mortgage available to later life borrowers

There are different types of mortgage available to borrowers in later life.

If you are looking to purchase a new property, such as a retirement home, then you can go for a traditional mortgage.

There is also a simple remortgage. You might have an existing mortgage coming to the end of its fixed or variable term and want to move to a new, cheaper rate. Or you might want to remortgage in order to release some of the equity you own in your existing property, perhaps to pay for an expensive holiday or in order to offer financial support to a loved one.

One building society offers a ‘Retirement Lifestyle Booster’, which is a form of interest-only mortgage. You receive a fixed amount every month for up to a decade, and in return you repay the interest on the loan each month.

When you come to the end of the term, you repay the capital you still owe. This can be a useful way for people who are mortgage-free to boost their retirement income via their property, without needing to downsize to a new, smaller home.

Then there are offset mortgages. These are a clever way to use your savings pot to reduce the size of your mortgage repayments. Your savings balance is offset against your outstanding mortgage – you only pay interest on the difference between the two. You do forego earning any interest on those savings as a result though. You must be able to demonstrate to the lender that you will be able to repay the full mortgage amount at the end of mortgage term. If you do not have a repayment strategy in place, the sale of the property can be used to repay the remaining loan amount.

This is a particularly useful type of mortgage for borrowers who have substantial savings, particularly in the current low-interest rate environment where interest rates on savings accounts are meagre.

Why you need a specialist broker’s help

While lenders are becoming more flexible with older borrowers, it remains very difficult for borrowers in later life to identify which lenders and products are right for their own situation. With so many different approaches towards how they assess borrowers and in what circumstances they are happy to lend, it can be overwhelming.

That’s why using a specialist mortgage broker like Large Mortgage Loans makes so much sense for later life borrowers.

We have access to dozens of lenders who are active in the later life lending market and are more than happy to consider applications from older borrowers. What’s more, we have a thorough understanding of exactly what they look for from borrowers, so can offer guidance on precisely which products and lenders are most appropriate for your needs, no matter how unusual.

Lending in later life is about far more than a tickbox approach – a quality intermediary will go through your case in detail and have the expertise and market knowledge to be able to pinpoint the exact right product for you.

The mortgage is secured on your property. Your home may be repossessed if you do not keep up repayments on your mortgage.

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