Choices with the Over 60s Mortgage
Deciding on the amount that you wish to apply for is more critical as an older borrower. The main consideration will normally be the value of the property. However, other factors such as the amount that an older borrower can afford to repay and any other assets that they may have will play an increasingly important role. Typically, someone with a large disposable income will be able to borrow a reasonably large percentage of the value of the property, but a much smaller percentage will be offered to those with lesser disposable incomes.
The length of the mortgage term available is almost invariably dictated by the lender. As a general rule, someone of 65 years of age or under should normally be able to obtain a mortgage of fifteen to twenty years, whereas someone over the age of 70 would probably be unable to borrow for a term of more than ten years. Every lender is likely to have slightly different rules, so if you are struggling to find a suitable product, speak to a specialist broker.
As with other standard mortgages, there is normally the option of going for a repayment or interest only mortgage. An interest only mortgage means that the monthly payments are smaller but that the capital of the loan remains outstanding. This requires additional planning to ensure that the finances are in place to clear the capital amount at the end of the term. If not, you will need to be prepared to sell up and downsize to release the cash.
Over 60s Mortgage Issues
Other issues to consider are the types of fixed or discounted deals that are available. These may be slightly more restrictive than in the case of traditional mortgages, mainly due to the greater risk that a lender is taking with an older borrower. Despite this risk, there is still the scope to obtain favourable rates fixed over two to five years, in most cases. Bear in mind that the longer the fixed period in relation to the length of the term, the greater the cost is likely to be. For example, a fixed period of five years is going to be considerably more expensive on a ten year mortgage than on a twenty year mortgage or longer. You are also likely to be tied into the lender for the duration of the fixed period. Further, there may even be substantial penalties if the borrower dies and the estate sells the property. This could be extremely costly and the small print in relation to these events should be checked.
Types of Income
In a bid to offer greater flexibility, these lenders will normally look at the whole of the borrower’s individual financial circumstances. Typically, this will involve looking at all sources of income including pension, income from investments and any other equity that means the loan would be secure. Remember, a lender simply wants to be sure that you can meet the repayments and, if not, that they have suitable security in the property to be able to get their money back.
Another alternative is to have a guarantor. For example, it may be possible for a younger relative or friend to act as a guarantor on the mortgage. This means that, in the event that you are unable to make the repayment, the lender can call on the guarantor to make the payments instead.