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.

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.

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.