Personal finance: How to get a mortgage if you’re over 65
1 Don’t wait
The most important advice for an older borrower is to start planning as early as possible. If you can, try to free up a little cash. Lenders are placing greater emphasis on ensuring mortgages are affordable within people’s existing spending patterns, so do what you can to reduce your monthly outgoings while still making sure that you can live comfortably at this reduced level of expenditure.
2 Explore your options
Lenders have for many years have been somewhat wary about advancing loans to customers nearing retirement. With people generally living longer they have started to relax their lending criteria, meaning there are options out there. As you’d probably expect, most lenders will offer deals with shorter mortgage terms if you’re an older borrower. Naturally, the shorter the mortgage term, the higher the monthly repayments, so it’s important to find a deal that strikes the right balance.
3 Make your income case
Demonstrating a sustainable source of income is essential in securing a good mortgage deal (regardless of age). Unfortunately, delaying your retirement is not a plan that many lenders will be willing to take into account, so you’ll need to ensure your income will be sufficient to meet repayments once you stop working. Pensions, insurance policies and income from investment vehicles (including buy-to-let properties) can all be used to demonstrate that the mortgage will be affordable to you.
4 Someone to fall back on
You may want to consider having someone act as a guarantor if you are worried that the repayments may become a little to high if your circumstances change for any reason. In that event your guarantor would have to cover your repayments, so this is not something either party should enter into lightly, or without taking comprehensive advice.
5 Pension possibilities
Recent changes to pension access rules mean you can now take a lump sum to contribute towards a deposit, markedly reducing future repayments. Up to 25 per cent of your pension can be taken tax-free (as before), but doing so will substantially reduce your future levels of income, so work out exactly what this will mean for your incomings and outgoings before making any decisions. Taking advice on this and other aspects of your finances will be invaluable in the long-run.
• David Marshall is business manager at MOV8 Real Estate.