Securing a Mortgage at 65 – A Guide for Older Homebuyers

Are you over 60 and dreaming of buying your own home? You’re not alone. Many older individuals wonder if they can secure a mortgage, especially if they’re nearing or past retirement age. The Daily Mail looked at the case of a 65-year-old who has been renting for years and recently received an inheritance. With an £85,000 deposit for a £120,000 home, the question arises: can they get a mortgage for the remaining £35,000?

Their expert in mortgage lending assures that there is a possibility, but it depends on various factors, including individual circumstances and the desired structure of the borrowing.

The Impact of Credit Crisis and Mortgage Market Review

Following the 2008 credit crisis, lenders became cautious about offering loans that extend into the borrower’s retirement years. This scrutiny led to stricter rules. The Mortgage Market Review further enforced requirements for lenders to assess mortgage affordability over the entire term, not just at inception. While no specific age limit was set, many lenders imposed their own, often capping the borrower’s age at 70 or 75 at the end of the mortgage term.

How Age Affects Mortgage Terms

For someone aged 65, this age cap means a mortgage term likely limited to 10 years. The closer you are to the maximum age, the more restricted your options. A £35,000 mortgage at a 4% interest rate over 10 years, for example, would cost £354.36 monthly, significantly more than if spread over 20 years.

However, the good news is that lenders have become more flexible. Some now extend the maximum age to 80 or 85, and others assess on a case-by-case basis.

Exploring Options with Different Lenders

Don’t limit your search to big banks. Smaller lenders and building societies often provide more flexibility. Some, like the Family Building Society, consider a maximum age of 95 at the end of the mortgage term. Marsden Building Society, for instance, offers specific deals for over-55s, with terms extending up to 18 years for a 65-year-old.

An alternative option is the Retirement Interest Only mortgage. This product, unlike standard mortgages, doesn’t impose a maximum term. Here, only the interest is paid monthly, and the principal becomes due upon the sale of the property, the borrower’s death, or a move into long-term care. Lenders like Livemore and Hodge Bank specialise in these mortgages.

Affordability is The Key Consideration

Regardless of the mortgage type, lenders will assess affordability based on your income and expenses. Your current income level, at around £24,000 per year, seems adequate for standard mortgages or Retirement Interest Only loans. However, lenders will also consider your post-retirement income, including pension, to ensure ongoing affordability.

For older individuals looking to buy a home, it’s crucial to shop around to find a mortgage that suits their age and financial situation. With the right approach, there’s a strong chance of securing a mortgage, paving the way to homeownership in later life.