Can I apply for a mortgage when I have retired?

By John Cossons, Mortgage & Protection Designer.

Home-buying trends change. If you are retired or close to retirement, you may be thinking about buying a home for one of several reasons. This might include moving elsewhere, downsizing, or more increasingly upsizing your home or possibly helping your children or grandchildren to buy a property of their own.

You might be considering moving to a new area, closer to your family or closer to the countryside or coast. You may find that the properties you are looking at are more expensive than the property that you are selling. If you are looking to buy a more suitable property within the same area, something with a bigger garden or a bungalow may also be more expensive. So, how can you fund the difference?

There are three main options available when you have retired-

Standard mortgage.

This would be the same as any other mortgage and as usual, anyone applying for a mortgage is assessed to see if they can afford the loan repayments. This usually consists of two elements, the amount of disposable income that you have and the maximum term that you can go to. All lenders will lend to age 70 but some will lend to age 80 or more. They will assess your regular income in retirement instead of employment. This income is usually from pensions, but other guaranteed regular income can also be used.

Retirement Interest Only (RIO) mortgage.

This is a lifetime mortgage that has no fixed term. It is “interest-only”, payments more affordable; however, you do not repay any of the capital until your property is sold when you die. If there are two of you then this is when the second person dies. The interest must be paid monthly and your ability to pay this is based on your retirement income or in the case of a couple the lower of your retirement incomes after either of you die. You have the flexibility to voluntarily overpay if you wish, to reduce the capital owed at the end.

Equity Release lifetime mortgage.

This is available for buying a property as well as releasing equity from your current property and is the most flexible of the options. You have the option to pay the interest if you are able, and we would always recommend that you do if it is feasible, or have the interest roll-up if it is not.

You can pay the interest monthly, quarterly, or annually if you wanted to. Also, you can overpay and reduce the capital owed at the end. This is a lifetime mortgage with an added benefit of a lifetime fixed rate. As you are not required to make payments your income is not assessed for affordability making this available to anyone over the age of 55 whether they have an income or not.

If you do not make any interest payments the interest is added to the loan and in turn, attracts interest in the following years. This is known as compound interest or interest roll-up.

With all these options there are terms, conditions, restrictions and limitations that need to be taken into account, I have just outlined the basic premise for each choice.

How Anstee & Co. can help you when you have retired.

We are a firm of Independent Financial Advisers and Mortgage Brokers. This means that we offer you unbiased mortgage advice. We look at all the options available to you from the whole of the market. So, why not contact us today to see how we can help you. The initial “getting to know you” meeting is at our expense and is without obligation. Our experience covers all aspects of financial planning including pensions, investments and mortgages.

Our Head Office is located at-

• Kettering, Northampton

Additionally, our adviser live and make use of meeting rooms at-

• Bedford, Bedfordshire
• Market Harborough, Leicestershire
• Northampton, Thrapston and Wellingborough in Northamptonshire.

Also, we make full use of video conferencing facilities such as-

• Zoom
• Microsoft Teams
• Facetime

There is no need to visit an office as all work can be handled remotely if you prefer. The choice is yours.

If you have any thoughts on this article, “Can I apply for a mortgage when I have retired?”, then we would love to hear from you.

Finally, the information contained in this article is for information purposes only and does not constitute financial advice. Anstee & Co. is a member of The Equity Release Council.

Equity released from your home will be secured against it.