Retirement Age for Mortgages

With rising interest rates, many homeowners have been forced into extending their mortgage term to ensure the monthly payments remain affordable. This has led to an increase in the number of people looking to take the maximum mortgage term available to them. Residential mortgage lending is generally limited up to the earlier of your anticipated retirement age or age 70, when based on employed income. However, there are options for lending beyond this where necessary and appropriate.

The maximum term is dictated by certain factors. Mortgage lenders typically allow a maximum 35-year or 40-year term at the point of application. As well as this, borrowing is typically limited up to the earlier of your anticipated retirement age or age 70, as previously mentioned. A small number of lenders will allow borrowing beyond age 70 subject to the plausibility of maintaining your income. This means the lender will take a view on whether it is sustainable for you to continue in your current occupation beyond this time. For example, active/manual jobs would be unlikely to be acceptable whereas deskbound jobs or a business owner with a back-seat role is more likely to be. In these cases, a handful of lenders allow borrowing up to age 75 and a smaller normal allow borrowing up to age 80.

Your anticipated retirement age is an important factor to consider. Just because a lender may allow borrowing up to age 70 or beyond, if you plan to retire before this time, it is important to consider how you will maintain or clear the outstanding mortgage once you retire. This is why lenders limit borrowing up to the earlier of your anticipated retirement age or the maximum age in their criteria.

If you need to borrow beyond retirement age and/or the lenders maximum age, there are options available. Lenders can look to use pension income as opposed to employed income. Providing the mortgage remains affordable based on current or projected pension income, residential mortgages are available into retirement. Further to this, specific types of mortgages such as Retirement Interest Only (RIO) and Equity Release provide options for those looking at borrowing into retirement. RIO mortgages are a simple interest only mortgage based on income in retirement. Equity Release is a specific type of mortgage, not dependent on income, where the payments are rolled up against the value of the property and the mortgage is repaid from the equity in the property once it is sold.

Whether you’re buying, selling or remortgaging, the reality is your monthly payments will probably be going up. There are options to consider whether it be extending your mortgage term, borrowing into retirement or reducing your mortgage balance if that’s a possibility. If you’re looking at rising mortgage payments or you have any other mortgage or life insurance query, we’re here to help with free, professional advice.