A few years ago, 50-year mortgages began to appear widely on the market. No doubt they have advantages and disadvantages, but for people of a certain age they serve as a reminder that a mortgage is fundamentally a long-term commitment, and that can be a little off-putting later in life. However, there is no reason why over-50s should not be able to make full use of the financial opportunities that are available.
It is the responsibility of the lender to ensure that you can afford your mortgage, and they will want to begin by finding out why you want a mortgage in the first place. There are plenty of reasons why an over-50 might want a mortgage, including:
- You may be moving house.
- You may have an outstanding mortgage and want to consider a remortgage because your circumstances, or wider economic factors, have changed.
- You may have encountered expenses that you would like to cover by borrowing against your property.
- You may for the first time be in a position to put a deposit on your own house after living in rented or work-related accommodation.
Visit www.1stukmortgages.co.uk/over-50s/ for help in understanding how the market relates to your circumstances.
There are two timing factors which affect getting a mortgage as an over-50.
Your age. A mortgage in your 50s is relatively easy but it gets progressively more difficult as the years go by. People in their 70s find it noticeably harder, although it is still possible. All mortgage providers have their own rules. These rules cover the age at which you can take out a mortgage (typically up to the age of 65-70) and the age by which they must be paid (typically by 70-85).
Your retirement. If you will be retiring before the end of the mortgage period, you will need to provide evidence that your retirement income will be adequate to pay the mortgage.
The majority of loans available to older applicants will be traditional repayment mortgages with a fixed interest. These make it easy to calculate the payments and set them against your expected income so that both you and the lender know that they are affordable.
However, there are many alternatives, depending on the lender’s strategy. The more a lender specializes in lending to older customers, the more options they are likely to offer. For instance, many lenders may offer offset mortgages, which are more flexible and allow a savings account to be set against the mortgage.
If you are looking to take advantage of your equity in a property, in order to fund your lifestyle or a special purchase, there are different schemes available. For instance, instead of a mortgage, you could apply for a secured loan, generally a more straightforward arrangement than a mortgage.
You need to be very careful if you want to consider equity release. There are two main types of these arrangements, a lifetime mortgage, and a home reversion scheme. Both of these could result in the lender owning most or all of your property by the time you die, so it may not be suitable for those wishing to leave an inheritance to their families.
The steps that will be involved in getting a mortgage for an over-50 are similar to those that anybody else would need to take.
- Analyze your present situation, your expected income and any likely expenditures for the foreseeable future, and where you want to be financially in the next 20 years or so. This will help you to clarify what sort of mortgage you are looking for, and the advantages and disadvantages of different types.
- Research the lender’s market. There are a number of lenders who specialize in lending to the over-50s. Local building societies and credit unions can often turn out to be more flexible for your needs.
- Compare a handful of different offers. You will need to compare the interest rate, the arrangement fee, the monthly repayments, and the term of the loan. This will give you an anticipated overall cost and a monthly payment to set against your income. Remember that the longer the term of the loan the more you will end up paying, and the harder it will be to predict future interest rates.
A Changing Market
As with everything else in the world of finance, things change quickly and new offers come onto the market all the time. Unless you are very confident in your own ability to navigate the maze, you would probably be sensible to enlist the help of a broker or specialist advisor.
Sophia Morrison is a realtor who has worked in the industry for over a decade so has a lot of knowledge and experience to offer whether it’s tips for first-time buyers, what to expect when applying for (and getting) a mortgage and what happens on contract day.