If you are retired, or planning to retire soon, you may be wondering if you can get a mortgage during retirement. There are many reasons why people might want a mortgage during retirement. Ultimately, the face of retirement is changing; we are living longer, we are spending more time in retirement and therefore we need enough money to help support us throughout later life.
Property is typically the most valuable asset that older people own, which is why borrowing against the value of your home could be a viable solution to raising funds.
Can you get a mortgage during retirement?
Yes, it is possible to get a mortgage during retirement, although it depends on your circumstances.
You may be surprised to learn that there is no maximum age at which you can apply for a mortgage, but each lender sets their own upper age limit. Some high-street lenders will have age limits as high as 85 and at Personal Retirement Planning we have helped clients as old as 100 to release equity from their home.
Small banks and building societies tend to have more flexible lending criteria than high-street banks and some have no upper age limit at all. The interest rates might be higher but an equity release adviser can compare options from multiple lenders to find the most suitable and affordable mortgage for you.
As long as you meet the lender’s borrowing criteria, have a good credit history and have enough property wealth to repay the loan, you are likely to be approved for a retirement mortgage.
Reasons why retired people might need a mortgage
There are several reasons why you might need a mortgage during retirement. For example:
- Pay off an interest only mortgage that is coming to an end
- Consolidate debts
- Home improvements
- Gift to family/support family
- Purchase a new home
- To supplement your income in retirement and meet general living expenses
The good thing to note is that when you release equity you can spend the money however you like.
Mortgages for retired people
Mortgages for people who are retired are typically called lifetime mortgages, also known as equity release.
With equity release, there is no obligation to make any mortgage repayments, the loan is typically repaid when you move into long term care and sell your home, or when you die. What’s more, lifetime mortgages that are approved by the Equity Release Council come with a no negative equity guarantee which means that you will never owe more than your house is worth, and therefore you would leave any debt behind to loved ones.
There are several types of lifetime mortgages to suit different needs. These include:
Lump sum lifetime mortgage
Take your tax-free cash in one go as a lump sum, or a series of smaller lump sums.
Drawdown lifetime mortgage
Release money as and when you need it by drawing down cash in stages. Interest is only added on the amount released.
Voluntary repayment lifetime mortgage
You can make repayments to cover some of the interest, all of the interest or more than the interest. By making interest repayments you can retain as much equity as possible.
The Equity Release Council is introducing new measures from 28 March 2022 that will guarantee all borrowers the right to make penalty free partial repayments of their loans if they wish to.
Enhanced lifetime mortgage
If you suffer from poor health you might be able to borrow more money against the value of your home, or the maximum amount based on your property value and any outstanding debt that you have.
How to get a mortgage during retirement
If you are thinking about getting a mortgage during retirement, here are some factors to consider to help you get started:
- It is recommended that you only use service providers such as lenders, solicitors and advisers, who are approved members of the Equity Release Council. This will provide you with peace of mind that they are genuine companies and that you have safeguards in place to protect you as a borrower.
- If you want to take out a mortgage during retirement you must seek both legal and financial advice before you can access funds.
- The first step in the process is to speak to an Equity Release Adviser. Personal Retirement Planning is a team of qualified Equity Release Advisers, we can tell you whether you qualify for equity release, how much you could borrow, and which lenders can offer you the most suitable and affordable retirement mortgage.
If you would like to speak with an adviser, please call Barry Leigh on 07980 210953 or email firstname.lastname@example.org.