Later life lending is used to describe mortgage borrowing after the age of 55.
You may, or may not, have plans to retire. But after 55 the mortgage lending landscape changes, and while mortgages are available, there are not as many lenders willing to grant you a mortgage.
Later life mortgages are not for everyone, which is why you need to seek professional advice before deciding what to do.
This guide aims to give a good overview of what later life lending entails, the options you might have and where to get the best advice.
What is a later life mortgage?
A ‘later life mortgage‘ is a description given to a range of financial products that are designed for homeowners over the age of 55. These are sometimes referred to as mortgages for pensioners.
We are all living and working longer and with this comes the need for housing and mortgages at an older age.
There is also an increasing need for parents, and grand parents, to provide financial support to younger family members, to help them buy a home.
A later life mortgage can be used to access the equity built up over many years, and release this as a cash sum.
Lenders are reacting to this growing demand by increasing the number of products available to the over 55’s.
Standard mortgages have a maximum term and a maximum age, with each lender deciding on the limits they are happy with.
And at the end of the term they will be expecting to have the loan repaid, in full.
Later life mortgages take a different approach to a borrowers age.
They are aimed at older borrowers, the minimum age is generally 55, and many lenders don’t apply a maximum age.
There’s also no need to repay the amount you borrowed. At least not for a while.
When you die or move into long term care, your home will be sold to repay the mortgage debt.
What types of later life lending mortgages are there?
You have four main options:
Standard mortgages
Retirement interest only mortgages
Lifetime mortgages
Home reversion plans
Standard mortgages
These are ‘normal’ mortgages provided by lenders who are able to lend beyond age 65.
You will need to pass all of the normal credit checks and affordability assessments. Most of these will need to be on a repayment basis and this can make the monthly payments quite expensive.
Retirement interest only mortgages
A retirement interest only RIO mortgage is specifically for people over the age of 55 and is only available on your main residence.
It too has an affordability assessment but this is only calculated against the ‘interest only’ monthly payments. The loan is usually paid off when you die, move into long term care or sell the house.
Lifetime mortgages
Equity release lifetime mortgages are only available to people over the age of 55 and do not require any monthly payments. For that reason there is no affordability assessment.
Interest is charged but this is added to the amount you originally borrowed. The loan is usually paid off when you die or move into long term care.
Home reversion plans
Home reversion plans are not a mortgage product but do get included under the ‘equity release’ umbrella.
They are for homeowners aged 55 and above who want to release equity from their home. Essentially you will ‘sell’ all or part of your home to a home reversion provider, in return for a lump sum. You will continue to live there until you die or move to a long term care home.
Why do people need later life lending?
The reasons are very varied but a lot of the need comes from living longer.
Homeowners in their 60s and 70s can be asset rich but cash poor. Historically, property prices in the UK have always gone up over the long term and this builds up a pot of equity.
But if you don’t want to move home, it’s difficult to access this money.
And this is where retirement mortgages and later life lending can help.
It’s certainly not right for everyone but it is a valid option for most people.
You could use these mortgages to:
Pay off an interest only mortgage
Carry out home improvements
Consolidate other debts
Gift a lump sum to your children
Purchase an investment property
Buy a new car
Supplement your pension income
Fund care costs
How to apply
Deciding to apply for a later life mortgage should not be rushed.
It is important to learn about the different options, and find out which one of them is right for you.
While many of the providers do accept direct applications, others require you to receive advice from an independent mortgage broker first.
Talking with a specialist broker is the only practical way of analysing all four of the possible options, and determining which, if any, are suitable.
You can apply for a RIO or equity release mortgage anytime after age 55. Age limits for the ‘standard mortgage’ option will depend on what you want to do. This solution is often used when your mortgage terms runs past the age of 65 and into your 70’s.
Getting the right advice
It may be a long time since you have applied for a mortgage, and there’s a good chance this will be the last time.
Make sure you have covered all the bases by speaking with an independent mortgage broker. They have access to over 100 lenders and can talk you through the different options and costs, helping you to make the right choices.
Respect Mortgages can put you in touch with one of the UK’s largest and best known mortgage brokers. They have fully qualified advisers all over the UK, and can help you whatever your age.
To get started, call us on 0330 030 5050 or tap the button below.
