Mortgages for over 50s & alternatives for borrowing | moneyfacts.co.uk

Michelle Monck

Michelle Monck

Consumer Finance Expert
Published: 06/10/2020

More people now expect to be paying their mortgage into their 70s according to research from Hargreaves Lansdown. The savings and investment platform found that one in five homeowners aged over 55 expect to be paying their mortgage into their 70s, up from one in six last year. The same research conducted last year found most borrowers hoped to be mortgage free by age 58, this has now risen to 60 years old. Rising house prices have contributed to the average age of first-time buyers increasing and a need for mortgage terms of 30 years plus to make monthly mortgage payments affordable.
Sarah Coles, personal finance analyst for Hargreaves Lansdown explains: ”Even if you snap up a property at the average age of 34, and take out a 25-year mortgage, it only takes a little bit of life to get in the way to leave you repaying well into retirement. If you end up dipping into your property equity, or face divorce in your 40s, you can push your final repayment date into your 60s.”

Can I get a mortgage over 50?

Those needing a mortgage as they approach or are in retirement will find their lending options look different to younger borrowers. This includes alternatives not available to their younger counterparts such as lifetime mortgages (a form of equity release) and retirement interest only mortgages. Lenders offering traditional mortgages often have a maximum age by which they want the debt to be repaid. Since 2015 the total number of mortgages available to older borrowers has increased every year as more lenders recognise the need of borrowers for extended terms.
In 2020 this growth has seen a knock back as lenders restrict product availability to manage the potential risks of lending in the current and potential future difficult economic climate.

06-Oct

65-69

70-74

75-79

80-84

85+

No max age

2015

324

717

2572

47

60

350

2016

14

737

1587

779

167

357

2017

20

690

1652

986

294

449

2018

18

507

1679

1054

374

644

2019

14

636

1668

1035

293

685

2020

48

287

617

598

158

452

Source: Moneyfacts October 2020: The number of mortgages available by maximum age at end of mortgage

Even though the traditional mortgage market has seen a softening in the availability of mortgages accepting older borrowers, alternatives such as lifetime mortgages have seen increases, with these growing to over 400 last month. While they may not be available yet at the same scale as traditional mortgages, they have features not available with a traditional mortgage. 

What are the differences between a lifetime mortgage and a standard mortgage?

A lifetime mortgage allows borrowers to use the equity in their own home and to release this as tax-free cash. They can then choose whether they want to make repayments or decide to make no repayments at all. The amount borrowed plus accrued interest is then repaid when they go into long-term care or die and is usually funded by the sale of their home. Borrowers should be aware that if they choose to not make repayments towards their lifetime mortgage the interest will roll-up, meaning interest is charged on interest every month until the lifetime mortgage is repaid. This means the total amount borrowed can increase significantly, however lifetime mortgages do offer a no negative equity guarantee, and this makes sure that the borrower will never owe more than the value of their home.
Both lifetime mortgages and traditional mortgages may have a maximum age for their borrowers. However, lifetime mortgages usually have a maximum age for application compared to a traditional mortgage that usually has a maximum age by which the loan must be repaid. For example, Nationwide Building Society requires borrowers to apply for a later life mortgage from age 55 up to their 85th birthday (increases to 95th birthday for those with an existing Nationwide Building Society mortgage). While Lloyds Bank that currently has the most competitive rate for a two-year fixed rate remortgage has a maximum age of 80 years old for when the mortgage should be repaid.
Lenders must use an affordability test when making their lending decisions for a traditional mortgage. A lifetime mortgage does not require this as the borrower is not required to make repayments and the agreement is on the basis that the borrowers’ property will repay the lifetime mortgage once they enter long-term care or pass away.
Interest rates for lifetime mortgages are usually higher than those available for a traditional mortgage where the borrower has a good credit score. For example, the best lifetime mortgage interest rate available right now is 2.30% AER (2.4% APR) from Legal and General Home Finance. This is compared to the best rate remortgage available at 1.39% (2.8% APRC).
The way each of these types of finance is repaid is also different. A lifetime mortgage does not require a make a monthly repayment, this means interest rolls-up, where interest is added to interest and over time this can significantly increase the total cost of borrowing. The total debt is then paid using the proceeds from selling the property after the borrower goes into long-term care or dies. While a traditional mortgage mandates a monthly repayment is made and the interest is then paid down over time.


Borrowers must receive advice from a specialist equity release adviser before they can take out a lifetime mortgage. Our equity release guide has more information about how lifetime mortgages work and our guide to equity release advice explains what to expect when talking to an equity release lender or broker.

Is a retirement interest only mortgage an option?

Retirement interest only mortgages started to appear in 2018 and are a hybrid of a traditional interest only mortgage and a lifetime mortgage. They allow older borrowers to borrow money using their house as security like a traditional mortgage. Also like a traditional mortgage they will need to pass the lender’s affordability test. The monthly repayments are lower as the capital is not be repaid, only the interest charged to it. Like a lifetime mortgage the debt remaining must be repaid when the borrower goes into long-term care or passes away.

Get advice to find the right mortgage for you

Those over 50 that want to decide on the best borrowing choices for them should consider speaking with a financial adviser, or a specialist equity release broker.

Disclaimer

Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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