Mortgages for pensioners

With the current economic climate, more people than ever still have a significant amount outstanding on their mortgage when they reach retirement age. Many lenders won’t accept these applications as they will be unsure whether you can afford the repayments without a salary-based income.

Getting a mortgage as a pensioner

If you’re over the age of 65 you may still be in a situation where you haven’t paid your entire mortgage and are looking for mortgage products. This might be to help downsize to a smaller property, remortgage your current home or release equity in the form of a home reversion or lifetime mortgage.

However, getting a mortgage when you hit retirement age can be difficult. This is because you will no longer have a regular salary to help pay it off. Most lenders will consider you as a high-risk customer as they will be unsure whether you will be able to afford the repayments using your pension.

Is there an age limit for getting a mortgage?

Although there’s no maximum age to apply for a mortgage, most lenders will have their own limits for when you can:

  • Take out a mortgage – usually between the ages of 65 and 80
  • Pay their mortgage by – usually between the ages of 70 and 85

This means that the older you are the shorter your mortgage term is going to be.

Equity release options

Equity release is the process of accessing the money tied up in the value of your property. These products are only available to those over the age of 65 and allow you to take out a long-term loan on your property. This money can be used to help pay off your mortgage or for other financial needs in later life.

Read more about equity release options

Mortgage approval for pensioners

Although it can be difficult getting a mortgage as a pensioner, it’s not impossible. The best chance you have at being accepted is by using a specialist broker who can put you in touch with the right mortgage lenders.

Some other things that will help your application include:

Your savings

Applying with a large mortgage deposit can help to improve your chances of getting approval. This is because the more money you put in yourself, the less you will be looking to borrow.

Your credit score

Lenders will look at your credit situation before they look at anything else. Therefore, it’s a good idea to check your score before making any applications. You can check your credit score with companies such as Experian and Check My File.

If you do have bad credit, as a specialist mortgage broker we can look into your individual situation and help source a suitable lender.

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Why Clever Mortgages?

At Clever Mortgages we can offer you the support and advice required to ensure you get the right mortgage for your first home.  We provide access to a comprehensive range of mortgages from across the market. We are also authorised and regulated by the Financial Conduct Authority (FCA) and adhere to the Treating Customers Fairly (TCF) guidelines, so you can be confident that we will treat you with integrity and only recommend products that meet your needs.

Mortgage types

A fixed rate mortgage is where your interest rate stays the same for a set time period (usually between 2-10 years). As a result your repayments are exactly the same each month, regardless of what happens to other mortgage rates. These types of mortgages are popular with first time buyers and people looking to budget each month, especially those who have suffered from a poor credit history.

The main downside to a fixed rate mortgage is that if mortgage rates go down you can be paying a higher amount than you would on a variable rate mortgage. However, this can also go in your favour and if interest rates increase you can be paying less than you would on a variable rate.

Every lender will have their own standard variable rate (SVR), which is considered their basic mortgage. This interest rate goes up and down, usually in line with the Bank of England’s interest rates but the lender is free to raise this at any time.

This means that your monthly payments can go up or down depending on what the interest rate is at a given time. Some months you could be paying more whilst other months you could be paying much less.

A discount mortgage is when a reduction is applied to the lenders Standard Variable Rate (SVR) for a certain length of time (typically 2-3 years). Discount mortgages are attractive as they can allow you to pay slightly less than the bank's standard rate. However as the SVR can still fluctuate they are not ideal for people who are looking to stick to a strict long term budget.

A tracker mortgage is basically a type of variable rate mortgage.  What makes them different from other variable rate mortgages is that they follow – track – movements of another rate, the most common rate that is tracked is the Bank of England Base Rate.

A capped mortgage is the same as a variable rate mortgage; however the interest rate can never rise above a set “cap”. These mortgages can work well for people who can budget for different mortgage repayments each month but want the reassurance that their payments will never go above a certain amount.

Offset mortgages are linked to a savings account as well as your current account. Your savings will be 'offset' against the value of your mortgage, and you'll only pay interest on your mortgage balance minus your savings balance. These types of mortgages work well for higher earners or people who have a good amount in savings that they want to use towards paying their mortgage.

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