As a general rule, mortgages are offered to individuals based on their ability to repay the loan through earned income. Consequently, 'mortgages for over 60s' have traditionally only been offered to those individuals who are young enough to be working regularly for the total duration of the mortgage.

For example, in order to take out a twenty-five year mortgage, the lender would want to ensure that the borrower is under forty years of age and expected to work until the time that the whole mortgage is paid off.

The Current Climate

In the current climate where many potential borrowers have typical financial situations and often, for instance, do not rely purely on earned income to pay off the mortgage, lenders are having to become increasingly imaginative with their offerings. In addition, lenders are also being forced to take account of age discrimination legislation.

As a result of such factors, more and more lenders are now prepared to offer mortgages to people over the age of 60. Currently, there are around twenty-five lenders that will consider borrowers over the age of 60, approximately twelve that are prepared to lend to people over the age of 70 and there are even a few (albeit a small number) that are prepared to consider borrowers over the age of 80.

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Mortgages for Over 60s

How common are they?

Although it has always traditionally been thought that those reaching retirement age should have little or no mortgage, this trend is now starting to reverse. This is partly due to the increased cost of living and therefore the inability of borrowers to save up large financial buffers to pay off their debts, but is also attributable to the huge rise in property prices that has taken place since the 1970s.

Britain as a whole, and the older generations in particular, are becoming increasingly asset rich and cash poor. Even though house prices have fallen recently, dramatic increases occurred from the mid 1990s until 2007, meaning that more and more over 60s have extremely valuable assets in their homes, but do not have the necessary monthly income to support a comfortable lifestyle. This issue has become particularly prevalent since the pension crisis has become more widespread. Commonly, many of those who are over the age of 60 are not keen on the idea of moving house in order to release equity, yet they are barely able to afford to live in their current property.

Having a mortgage on a property when you are over the standard retirement age is not in itself a large problem. If the property is worth £200,000 and there is a mortgage of £40,000 outstanding, this will simply be paid off when the property is sold or the owners die. In reality, very few over 60s are in a negative equity situation and, therefore, the mortgage will simply be a liability that has to be taken into account when the estate is finalised.

Based on this, 'mortgages for over 60's' are actually far more common than you would think. A quarter of all people over the age of 60 have some sort of mortgage debt, with the collective amount of mortgage debt currently standing at approximately £98 billion. The average mortgage debt for those over the age of 60 is £32,000; with the over 70s group appearing to be struggling the most with average debts of £45,000.

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Mortgage Choices

Deciding on the amount that you wish to apply for is more critical as a more mature borrower. The main consideration will usually be the value of the property but other factors such as affordability 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, whereas a much smaller percentage will be offered to those with lesser disposable incomes.

The length of the mortgage term available differs from lender to lender, so if you are struggling to find a suitable product, you need to speak to a specialist broker.

Unlike other standard mortgages, lenders are less likely to offer an interest only option to mature borrowers but there are some that do. An interest only mortgage means that the monthly repayments 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.

Other issues

Some lenders will require life cover to be in place for mature borrowers.

Types of Income

In a bid to offer greater flexibility, most lenders will 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. 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 repayments, the lender can call on the guarantor to make the repayments instead.

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Alternatives for mature borrowers

There is no denying that lenders are taking a greater risk with borrowers who are nearing or have passed the age of retirement. Based on this higher risk, most lenders will aim to achieve a higher rate of return from these mortgages. Whilst there is a call for lenders to be competitive, these types of mortgages are unlikely to be the cheapest on the market and it is prudent to consider alternatives to financing a property.

A classic example would be to look at the range of mortgages that are aimed, and indeed favour, the more mature borrower. The generic term for this type of mortgage is a lifetime mortgage or an equity release plan. These types of mortgage plans commonly offer lump sums or regular payments that can supplement income and will generally become more cost effective, as time goes on.

Standard Mortgage or Equity Release

As a mature borrower, one of the main questions that you must ask yourself is whether you should be looking at a standard mortgage, albeit over a shorter length of time, or whether you should be considering a home equity release scheme.

Home equity release schemes fall into the general category of being lifetime mortgages and are dealt with in more depth in a specific article. Although home equity plans are very popular and for many people an excellent way to allow borrowers to have the benefit of the equity that has built up in property without the need to actually move house or to downsize, these plans are not for everyone.

For many people, a home equity plan can be both expensive and place unnecessarily onerous restrictions on the owner if they decide to move or sell the property, in later years. For those who are wary of taking out a home equity plan, a standard mortgage aimed at the needs of pensioners may offer the necessary cash and flexibility.

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