The number of people who still have outstanding mortgage debt when they hit retirement is on the rise. In fact, according to the Office for National Statistics (ONS), there are currently around 350,000 over 65’s who still owe money on their house. With around 40,000 of these mortgage deals coming to an end each year, retirees have no choice but to renegotiate a new deal on their borrowing.
Getting a mortgage is certainly possible in retirement, but it can be more difficult. Whether you want to move house or remortgage your existing home, it’s important you understand the challenges you face so you can adequately prepare for your financial future.
The Challenges Facing Retired Borrowers
There are several key challenges facing older borrowers if they are looking to remortgage or change mortgage providers in their retirement. Some of these are:
Mortgage repayment periods are getting shorter
Big banks and lenders are getting tougher about when mortgages are expected to be repaid. For instance, Skipton recently cut their maximum repayment age from 80 to 75, and West Bromwich Building Society reduced theirs from 80 to 70. Many of the big players such as Halifax, Lloyds and Santander have a maximum age of 75, or 65 for interest only loans.
Lower income may restrict the offers available
Once you are retired, your income will inevitably drop. Depending on how much this leaves you with, as well as how much you owe on your house, you could find your options more limited than they would have been if you had secured a deal while you were still working.
Higher risk may increase the interest rate
Because it is viewed as riskier for a lender to take on an older borrower, you could end up paying a lot more for your mortgage than a younger person would. Interest rates may be higher and repayment terms shorter, so affordability can be a big challenge.
If you are still working at the moment but feel that the amount you are paying right now on your mortgage may not mean you’ve paid it off by the time you retire, speak to your lender sooner rather than later. While you’re still employed, you have many more options and better value for money deals available to you than you will when you eventually stop work.
How To Find A Good Mortgage Deal
If you are facing the reality of getting a mortgage either in retirement or one that won’t be paid off until after you retire, finding a great deal in good time should be top of your list of priorities. You can start by looking at online price comparison sites, however bear in mind that not all mortgage products will be represented on these. Try to use at least two or three different sites to get a good overview of the market.
Once you have an idea of what you could be paying and who is likely to take you on, consult a mortgage broker to uncover any other deals on the table. Some specialist deals for older borrowers are only available through brokers, so it’s well worth taking the time to go through things with these an independent advisor.
Make sure you pick a mortgage that is right for your circumstances, and one that you can afford the repayments on. Equity release may look appealing, as it could help you fund your retirement and pay off your mortgage sooner, but make sure you understand fully what this scheme involves before signing up to anything.
If you are struggling to find a mortgage, give me a call and we can explore your circumstances in more detail. Call 01252 759 233 or email info@thesurreymortgagebroker.co.uk