Finance options can appear limited upon first glance to those aged over 50 years old, as some lenders can view an older applicant’s age as a high-risk factor and place restrictions on borrowing.
However, there are specific products available on the market for the mature borrowers.
This article will explore the financial options available for those over 50 years old, including the criteria that lenders will review during the application process.
How Can I Obtain a Mortgage if I’m over 55 Years Old?
The financial market has expanded over recent years and therefore there are now more options than ever available to the more mature borrower.
The shift in the market conditions that would traditionally only allow borrowing terms up to retirement age has come about due to a range of factors such as higher house prices and therefore longer mortgage terms to aid affordability, as well as the trend that people are buying property later in life.
If you already own a property, an equity release mortgage may be appropriate, that enables the withdrawal of the value of the equity owned within a property in order to receive either a cash lump sum, a source of regular income or a combination of both. Additionally, exploring open banking options can provide insights into your financial behaviour and help tailor mortgage terms to your needs. Similarly, considering revenue based loan options may align your financing with your financial goals in retirement.
If an equity release is chosen, following undertaking the process, the homeowner can continue to reside within the property up either until the sale of the property, the move into care home or death. Often the repayment of the equity release product is settled when the property is sold, including the capital plus the interest due.
Equity release products are typically only available to those over 55 years old and often there is not a criteria that entitles any outstanding mortgage to be fully repaid before proceeding with an equity release option.
Although the appeal of an equity release product includes making no monthly repayments, there are also disadvantages of this type of financial decision and therefore it is strongly advised that independent financial advice is sought before committing to an equity release product to ensure that the consequences are fully understood.
How does an Over 55’s Mortgage Work?
Another option instead of a full equity release mortgage is a 55+ mortgage, which is a hybrid financial product that combines a standard mortgage with an equity release.
With this option the mortgage is generally an interest-only product requiring monthly repayments however the ownership of the property is retained. Typically, there is a minimum loan for an over 55s mortgage of £20,000 and the maximum would be 60% of the property’s total value.
At the end of the mortgage term, the capital loan would need to be settled which is usually completed with the proceeds of the property sale.
What is a Reverse Mortgage for Over 55s?
A reverse mortgage is simply another name for an equity release product. The term reverse mortgage is commonly used in America and Canada.
Can I Obtain a Buy-To-Let Mortgage if I’m over 55 Years Old?
The simple answer is yes!
Following the changes in pension regulations in 2015, pension savers were provided access to their pension funds to order to make other investments such as starting a property portfolio.
Since this change, the buy-to-let mortgage market has responded and introduced buy-to-let mortgages for the mortgage mature investor.
There are many considerations to factor in when thinking of becoming a landlord and applying for a buy-to-let mortgage including the legislation that needs to be met before leasing a property such as healthy and safety, lease documentation and property documents such as energy performance certificates.
There are also costs to consider such as advertising to lease a property and maintenance costs as well as the risk of missing rent due to disputes with tenants.
In addition, it is worth noting that the buy-to-let mortgages are not regulated in the same way as standard mortgages and therefore specific advice on this area would be suggested to ensure that all consequences are known before committing.
Therefore, before withdrawing a pension fund in order to invest in property it is highly recommended that independent financial advice is sought.
Bear in mind this may be slightly different if you have a poor credit history, so bear this in mind when applying for a mortgage with a poor credit history.
What should be considered before taking out a 55+ mortgage?
As with any financial decision, it is strongly advised that sufficient research is undertaken before proceeding with any option in order to ensure that the full details of the product have been reviewed and compared against other similar financial products on the market.
It is highly recommended that independent financial advice is sought in order to assess the applicant’s current financial position and assist with finding the most appropriate financial solution, with the best interest rates and terms following searching the entire mortgage market.
As mentioned, there are now a wider market of lenders and financial products available for the more mature borrower, for a range of purposes and therefore there is more choice available.
Lenders will all offer slightly different terms and have varying lending criteria however, when assessing an application for borrowing at over 55 years of age, the main factors will be:
- Age – The age of the applicant both at the time of the loan application as well as the age at the planned end of the loan term.
- The applicant’s credit score.
- Income and affordability.
- Equity – The amount of property equity or total value of other assets.
Mortgages for Over 55s Summary
In this post we have explored a couple of options that may be available to the more mature borrower.
As with any financial decision, it’s always recommended that independent financial advice is sought before making any commitments.
In addition, advice and assistance from a specialist Mortgage broker can prove invaluable in order to reveal a wide range of financial solutions as well researching the not competitive prices and borrowing terms.
Should you be seeking to secure a loan and you are over 55 years old, please do get in touch with our friendly team who can offer a personalised service in order to review your personal circumstances and discuss the options available.