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Over 50s
EVERYTHING YOU SHOULD KNOW ABOUT OVER 50S MORTGAGES
When looking for a mortgage for the over 50’s make sure you deal with someone who has experience in this segment of the mortgage market. Mortgage lenders all have different criteria when underwriting mortgages for applicants over the age of 50 and therefore help from a specialist broker can help you to navigate the criteria and avoid the pitfalls or rejections that people commonly face.
HOW DO OVER 50 MORTGAGES WORK?
Very simply they work the same as any other mortgage regardless of age in terms of processing, the questions asked, and the paperwork required. The only difference being, is that your age will define the choice of lenders available to you. For example, if you approached a broker at the age of 50 and wanted a 20-year mortgage term the choice of lenders will be vast. If you approached a broker at the age of 60 and wanted a 20-year mortgage term the choice of lenders may have reduced by as much as 75%.
ARE MORTGAGES STILL AVAILABLE FOR THE OVER 50’S?
Very much so – There is more choice today than there has been for years as lenders look to loosen their criteria and try to gain market share in a very competitive mortgage market. Banks and building societies, along with some specialist lenders, understand that borrowing in later life is here to stay and a valuable segment of the market, which is great news for you as the more lenders involved means the greater choice of mortgage deals for you.
IS IT HARDER TO GET MORTGAGE FOR OVER 50’S?
Not at all, the criterion is the same whether or not you’re a first time buyer or 60 years old. Your income source may have changed and the older you are, for example you may now be claiming some pension income and the selection of lenders may decrease slightly but ‘affordability’ is the main checking point for lenders.
MY MORTGAGE TERM IS COMING TO AN END, WHAT ARE MY OPTIONS?
Your options are varied and will depend on your age and your income / affordability. Assuming that these factors are fine you will find a new lender to offer you terms for extending your mortgage and this could include the choice of interest only or a repayment mortgage. A top tip here would be to explain your situation to an established or trusted broker and let them come up with some solutions for your individual scenario. The options could involve any of the following:
- Refinancing your mortgage deal your existing lender
- Looking at a new mortgage deal with a new lender
- Considering different options that may be available such as equity release.
I STILL OWE MONEY ON MY MORTGAGE AND THE LENDER IS REQUESTING THE MORTGAGE IS REDEEMED.
This is a familiar situation when people in the past had set their mortgage to end when they reached pension retirement age of 65. A lot of homeowners in this example may have taken out an endowment mortgage 25 years precisely and then over time cashed in their endowment, or the endowment is due to mature and the payout is less than what was expected, and lower than the amount needed to clear the mortgage in its entirety. If you are faced with a similar situation the options shown above would still be available and relevant to you.
WHAT’S INVOLVED IN SORTING AN OVER 50’S MORTGAGE?
The process is the same as for any other mortgage. Your broker or bank will first assess your affordability, they will then provide some quotes and options and assuming you wish to go ahead they will arrange to collect the necessary documentation needed such as proof of address, I.D, and proof of income. The process from start to finish should take 4 – 8 weeks, so allow for this timeframe and start your discussions in advance of your current mortgage coming to an end.
HOW LONG CAN I HAVE THE NEW MORTGAGE FOR?
At 50 years old it should be relatively easy to find a mortgage term of up to 25 years. If you are discussing your mortgage at age 65, you could still get a 25 year mortgage although the choice of lenders will be smaller. In summary there should be a mortgage lender to assist; your broker just has to match the right mortgage deal to your circumstances.
CAN I ADD OTHER FAMILY MEMBERS ONTO THE MORTGAGE TO HELP ME GET A NEW MORTGAGE?
The answer is yes, although it depends on the lender used as they all have different criteria. You would also need to consider any tax implications of this type of structure, such as additional stamp duty for the person being added to the mortgage, so it would be wise to speak to the appropriate professional, such as a tax specialist or conveyancer to discuss this in further detail.
Other factors to consider would be the effect to the person being added to the mortgage. If the new applicant wanted to get a mortgage in their own right at a point in the future, being named on your mortgage would potentially affect their borrowing levels as most lenders will take this full mortgage payment into account thus lowering their ability to borrow the maximum amount as this cost would be viewed as a commitment and therefore lower their perceived affordability.
CASE STUDY
- Mr & Mrs Smith are aged 78 & 63 and are coming to the end of their interest only mortgage term.
- They want to borrow £80,000 on their property, to enable them to clear their existing mortgage and clear some unsecured debts.
- The property is currently valued at £240,000 and they would like a mortgage term of 30 years.
- They have chosen downsizing as their preferred repayment strategy, as they wish to remain in their existing property for as long as they are able, in order to remain close to family.
- Both applicants are currently retired with Mr Smith in receipt of a full state pension and Mrs Smith due to receive a full state pension at 65.
- Additionally, Mr & Mrs Smith receive private defined benefit pensions for £25,700 & £15,000 which both have spouse benefit of 50%.
- The over 55 mortgage could be offered for the loan amount requested providing them with the flexibility to continue their interest only mortgage payments and to remain in their current property near their family.