A growing number of homeowners are paying off their mortgages later in life resulting in many more over 50s being left with a sizeable loan remaining.
Long gone are the days when mortgages were paid off by retirement.
People are taking longer to get onto the property ladder. Lifestyle changes, including divorce or the need to remortgage to release equity to help grown up children or grandchildren onto the ladder. All these factors mean that more people end up keeping their loan going for longer.
Getting a mortgage later in life is not as straightforward as perhaps in your 20s or 30s.
What’s the deal with mortgages for older people?
Lenders want to know the ins and outs of income and expenditure for mortgage applicants of any age.
For older people, the issue is getting a loan approved when they have retirement on the horizon, when income is expected to fall.
Lenders have certainly relaxed their acceptance criteria over the couple of years, previously it clamped down hard on lending to older borrowers.
Lenders set their own age limits around applying for a mortgage. Today they will go to age 85 and 90, which means if you’re in your 50s you can still have a 30-year mortgage.
There’s one bank - Aldermore - that will lend until age 99 in some cases.
These changes will be a lifeline to those who need to keep their mortgage going for longer.
David Hollingworth at L&C Mortgages says: “As more of us live and work for longer lenders are increasingly accepting an anticipated retirement age of 70 where plausible.
“More lenders are happy to stretch the maximum age as they recognise that it may exclude borrowers who are perfectly able to take advantage of the low rates currently on offer.”
Smaller building societies are worth approaching, just as much as the high street lenders. And don’t forget the challenger banks, eager to win new business.
There’s still an affordability check, of course. So as long as you have long-term ability to service and repay a mortgage through income from a job, a buy-to-let property, investments, a pension or a trust then you are in the running.
A type of mortgage has been designed just for those in retirement who have been paying an interest only mortgage all their lives and find themselves with a huge lump of capital to repay, without the means to do so.
While these retirement mortgages, known as retirement interest-only mortgages (RIO), are still a relatively new product, they are gaining traction.
The RIO allows older homeowners to make monthly interest mortgage payments until they die or go into long-term care.
The lender receives the capital they are owed when the property is sold - there is no end date or term, so can take a borrower through to the end of their life.
There are now 18 providers offering 74 products. They are mostly from regional building societies including Tipton & Coseley Building Society, Bath Building Society and Hodge Lifetime. On the high street, Nationwide is the only option.
Average rates are typically higher than mainstream mortgages, ranging from 2.74% to 4.55%.
Ready to remortgage?
With an impending interest rate rise from the Bank of England, many borrowers on variable rate mortgages will be considering a fixed rate loan to protect against a hike to monthly repayments.
You can also seek professional help from a mortgage broker or an independent financial adviser who specialises in mortgages.
They can assess your current deal, take your circumstances into account and find you the best deal from the whole of the market – potentially saving you thousands of pounds over the mortgage term.
Make sure you choose a fee-free broker to save on charges.
Alternative options to remortgaging
If remortgaging proves too tricky, there are other routes to explore.
The pension freedoms, available to people aged 55 and over, make it possible to access the money saved in your pension.
Equity release is another popular option for those faced with needing to pay off a mortgage if there is insufficient income to service a new one.
Again, taking advice from a professional is very important to work out the best solution for your circumstances.
If you think your lender is treating you unfairly, you can complain direct. If the bank gives an unsatisfactory response you can go to the Financial Ombudsman Service.
Is Equity Release right for you? Find out more here