Our guide to borrowing in retirement
Some things may change as we get older and begin to look forward to retirement, but yearning for the security that comes with owning your own home is not exclusive to the young - it extends to the young at heart, too.
We are now living longer than ever before - the Office for National Statistics estimates that a quarter of the UK’s population will be aged 65^ or older by 2050 – and many of us have never been healthier or wealthier.
The situation looks unlikely to change any time soon. Recent research by the Financial Conduct Authority indicates that 40% of borrowers^^ who took out a mortgage in 2017 will be older than 65 by the time it matures.
The good news is that whatever your age, you can apply for a mortgage at Leek United – even if you’re no longer working.*
Our guide to later-life lending below will tell you the facts, explain your options in easy-to-understand language, and answer key questions like:
- Can I get a mortgage if I’m approaching retirement, or already retired?
- Does my pension income count towards a mortgage?
- What types of mortgage are available?
- How long can my mortgage be at 50?
- Do I need life assurance for a mortgage?
The easy way to borrow for retirement
Borrowing in retirement – or approaching retirement - has never been easier, especially with Leek United.
We treat our customers as individuals, not faceless “applicants”. That’s why we have no upper age limits at the start or at the end of your mortgage term.
Does my pension count for a retirement mortgage?
We’ve also responded to the needs of this more-mature mortgage market by improving our assessment criteria, so we now consider income from self-invested personal pensions.
In addition, if you’re not due to retire for 10 years or more and you have a pension, we will base our affordability calculations on your current income rather than your projected pension income.
As well as pension income, many later-life borrowers also have property assets to take into account. If you have a buy-to-let property that you own outright, for example, we may be able to consider the rent you receive as part of our affordability calculations.
The different types of mortgages for older borrowers
There are many reasons for later-life borrowing. You could be buying a new home but retaining your existing property as a buy-to-let to generate income in retirement, ‘downsizing’ into a new home, or simply remortgaging to get your finances and home in order for the years ahead.
Whatever your reasons, the full range of Leek United mortgages are available to you, including interest only, fixed and variable-rate repayment mortgages. Many older borrowers prefer the relative cost-effectiveness of an ‘interest only’ mortgage, but the choice is entirely up to you. Bear in mind that if you do opt for an interest only mortgage, you will need to provide evidence that you have a suitable repayment plan in place, in line with the Society’s responsible lending criteria.
No age limits when borrowing in or into retirement with Leek United
Unlike some providers, there is no age limit on applying for a Leek United mortgage. We assess each application on its own merit, although the percentage of the purchase price or valuation of your new home that you can borrow (called the loan-to-value rate, or LTV) will vary according to your age:
- If you’re expecting to retire before the end of the mortgage term, the maximum LTV is 80%.
- If you have already retired or you will be relying on your pension income to repay your mortgage, the maximum LTV is 70%.
Life insurance for borrowing in retirement
Contrary to popular belief, there is no legal requirement for you to take out life insurance in order to arrange a mortgage in the UK – although it could perhaps makes sense to do so, to ensure your mortgage payments are taken care of if anything happens to you.
There are also certain situations where Leek United requires life insurance cover to be in place, such as joint applications where one of the applicants will be 83 or over when the mortgage matures **. You will also need buildings insurance, as it is required by most mortgage providers.
Call us today to make an appointment for free personal mortgage advice. Or just pop into your local branch – whether you’re 18 or 80, you can depend on us.
^Overview of the UK population: August 2019, Office for National Statistics: https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/populationestimates/articles/overviewoftheukpopulation/august2019
^^Sector views: January 2019, Financial Conduct Authority: https://www.fca.org.uk/publication/corporate/sector-views-january-2019.pdf
*We do require you to have a minimum annual income of £20,000, are a UK or EU citizen, or have been resident in the UK for the last two years with a non-conditional and permanent right to reside. Our knowledgeable team will assess your application on its merits – not on your age. Your home may be repossessed if you do not keep up repayments on your mortgage.
**On all joint applications that rely on the income of an applicant who will exceed their 83rd birthday before the mortgage matures, our affordability assessment must consider the remaining applicant’s ability to continue to service the loan repayments in their own right.