Arranging a mortgage can often be a nerve-jangling affair - and that applies to someone who is 60 just as much as it does to someone who is 30. But it doesn’t have to be that way.
More and more people are arranging mortgages later in life, as they approach retirement or when they are already retired. In fact, 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*.
That’s why we’ve decided to demystify the entire process with easy-to-understand, no-nonsense answers to the most common questions that people ask when considering a mortgage in retirement or as they approach it.
*Sector Views, January 2019, Financial Conduct Authority
Yes, we consider income paid in sterling from occupational, private and state pensions, as well as rental income from ‘unencumbered’ properties (that is, properties with no mortgage on them), investment income and income from trust funds. 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.
There is no age limit on applying for a Leek United mortgage, either when you apply or when the mortgage is due to come to an end, BUT your age at the end of the mortgage term does affect the percentage of the cost of your new home that you will be able borrow (this is called the Loan to Value rate, or LTV).
This means that:
As outlined above, it is your age at the end of the mortgage term that defines how much you can borrow, not your age when you apply.
This means that:
Yes, we have no upper age limits at the start or at the end of your mortgage term, and as long as you have a non-conditional and permanent right to reside in the UK, and your actual or anticipated income in retirement is sufficient to make the repayments, our knowledgeable team will assess your application on its merits, not your age or retirement status.
Bear in mind, however, that your age at the end of the mortgage term will affect the amount you can borrow, as a percentage of the cost of your new home (this is called the Loan to Value rate, or LTV). See the answers above for more detail.
No, not at Leek United. We offer our retired customers the full range of Leek United mortgages, including a variety of interest only, fixed and variable-rate repayment mortgages. Many retired borrowers often prefer the relative cost-effectiveness of an ‘interest only’ mortgage, but the choice is yours. If you choose an interest only mortgage, you must have a clearly understood and credible repayment strategy in line with the Society’s responsible lending criteria.
Interest only mortgages are a popular choice for retired people, as only paying the interest due against the loan means smaller monthly repayments than fixed or variable rate mortgages. It does mean, however, that at the end of your mortgage term you will need to repay all the outstanding capital, which could be a significant sum. If you choose an interest only mortgage, you must have a clearly understood and credible repayment strategy in line with the Society’s responsible lending criteria.
You can apply for a mortgage with Leek United at any age – even if you’re no longer working. As long as you have a non-conditional and permanent right to reside in the UK, and your actual or anticipated income in retirement is sufficient to make the repayments, our team will assess your application on its merits – not on your age.
However, your age at the end of the mortgage term will affect the amount you can borrow as a percentage of the cost of your new home (this is called the Loan to Value rate, or LTV).
Our minimum mortgage term is five years, and our maximum mortgage term is 40 years. However, your age, planned retirement age and income - both now and in retirement - could impact the maximum mortgage term available to you.
Your age at the end of the mortgage term also has a direct impact on the amount you can borrow -this means that:
Yes, if the value of your home has increased since you took out your current mortgage, you may be able to arrange additional borrowing with us, as long as there is sufficient equity in your home and the purpose of the additional borrowing meets our responsible lending policy on affordability and purpose. We do not provide additional borrowing for investment or business purposes. If you are an existing Leek United mortgage customer and would like to discuss releasing equity from your home, you can speak directly to your local branch or contact one of our experienced Qualified Mortgage Advisers.
No. There is no legal requirement for you to take out life insurance in order to arrange a mortgage in the UK – although it might make sense to do so for peace of mind, so if anything happens to you, you know your mortgage payments are taken care of. When applying for a mortgage with Leek United, you will need buildings insurance, as required by most mortgage providers.
Yes, retired couples can take out joint mortgages with Leek United. Depending on the age of each joint applicant, we will carry out affordability checks both jointly and individually to ensure mortgage repayments could continue if only one applicant continues to make payments. This will take into account both additional pension income and reduced household expenditure with just one occupier in the property.
We aim to treat all borrowers with financial difficulties or mortgage arrears in a sympathetic and positive manner, but we do need to know if your circumstances do change – so talk to us, as soon as you realise your change in circumstances might affect your ability to make your monthly mortgage repayments.
We’ll ask you to complete an income and expenditure form so that we can get an idea of a more workable repayment level for you. We might also need to see some recent payslips/bank statements.
After that, there are a number of different options to consider, from a period of reduced payment (usually no more than three months) to reducing your monthly payments by extending the term of the mortgage.
Read more about the different options available to you.
Whatever option is best for you, the first thing you need to do is get in touch with us as soon as possible.
Yes, you can repay any kind of mortgage early, including mortgages arranged during or ahead of retirement. This could save you money in the long term, but you may incur an early repayment charge. Check your mortgage offer document for details of any charges.
When you apply for any mortgage with Leek United, we make various checks to see if you pass our affordability assessment and meet our other lending criteria. These include credit searches, identity checks, income and employment checks and property valuations. When these checks are complete, an independent underwriter will review your application in full and decide whether to approve the mortgage. If your application is approved, you receive a binding mortgage offer that is valid for six months.
We aim to process your mortgage application as quickly as possible. The precise length of the process will vary depending on the type of application and whether all supporting information is included with the application.
NB. This article is intended as a summary only and does not constitute legal or financial advice from Leek United Building Society. We recommend that you seek independent legal and/or financial advice if you have any questions. You can speak to a Leek United Qualified Mortgage Adviser by contacting us on 0808 169 6680.
Monthly payments for a repayment mortgage:£0.00
Monthly payments for an interest only mortgage:£0.00