Mortgages in your 60s - more options than you think

 Moving wealth through generations, a new series from Caxton

We asked mortgage expert Simon Holdsworth to talk about some of the opportunities and snags with re-mortgaging for the 60+ generation. Here's what he told us.

Today I've been researching later-life mortgages. I've been a regulated adviser for over 40 years and recently something has shifted. More and more of my older clients - many of whom paid off their mortgage years ago -are coming back to ask about taking out a new one.

And the options available to them might surprise you.

• More than 15 lenders will happily accept mortgage applications from people up to age 85
• Around 20 lenders offer mortgage terms up to or beyond age 95 - with roughly half having no maximum age at all
• You can choose repayment or interest only
• You can fund a new purchase or remortgage your existing property
• Buy to Let is on the table too
• You can choose from Fixed Rates, rates that Track the Bank of England Base Rate and Discounted Variable Rates – in other words all of the same options available to younger borrowers

So why are people who've already paid off their mortgage considering taking one out again?

The reasons are varied:

• Our accountant has advised us to reduce the equity in our house as part of an estate planning exercise to mitigate Inheritance Tax.
• We want to help our family to get onto the property ladder.
• We want to help the family with a bit of cash for things like school fees for grandchildren.
• We have fallen in love with a place in Provence.
• We need a bit of capital but don’t want to touch our investments or pensions.

Older than you feel?

Well I am definitely going to have to admit to growing up, although my wife would argue otherwise. I have been helping people with property finance for 40 years now.

When I started in the industry we were encouraged to work hard and get that mortgage repaid as soon as we could. An unencumbered property was always the goal and since the property boom of the 80s and 90s, that advice has not changed.

However in recent years many of my older clients are asking for my mortgage advice again despite many of them achieving that repayment goal several years ago.

Often the enquiry starts off by asking whether we can help with an Equity Release facility, a Lifetime Mortgage or even a Retirement Interest Only (RIO) mortgage. But in most cases the conversation soon changes. It is now clear that older homeowners do not realise that there are so many options open to them to have a normal mortgage in retirement. The choices do not end at age 70.

So many of our clients have had excellent financial advice through their careers: they have healthy pensions, they may have portfolios of investments that generate a good income or may have picked up a few investment properties over the years that generate rental income. Lenders will also take into account your state pension and benefits, pensions from past employers etc.

I find that clients don't realise that the door to mortgage finance has not closed, with some lenders it may have done but there are many lenders for whom these sort of clients are very much the target market. They offer standard products where you do not have to pay the higher interest rates often associated with some ‘speciality’ products.

A more human approach to lending

Typically the lenders providing these later-life mortgages are the good-old traditional building societies who have perhaps realised that taking on the big boys such as Halifax, Santander or Nat West is not realistic. Those behemoths have the ability to do such high volumes of transactions at such fine margins that the smaller building societies cannot hope to compete.

Instead what we are seeing is that these smaller lenders are playing to their strengths with a more human approach, more bespoke criteria and an appetite for the business that many of the giants have chosen to withdraw from. Whilst the margins may mean they are not quite as well priced as the very cheapest deals out there it would also be very wrong to assume that you have to pay a premium to take a mortgage in retirement.

Lenders are in the business of managing risk and pricing to get a return. They want to lend money, have their interest serviced and eventually be repaid. Those lenders who are lending mortgages in retirement are being prudent in my opinion, after all who is the bigger risk, the couple who made every mortgage payment on the day it was due for 30 years and then fully repaid their debt or the First Time Buyer who has been in work for a year and has never borrowed money before?

As with so many things in life the key here is to take qualified, independent advice, in the event that you are considering using a mortgage in retirement. There are more options available to you than you may think. Being retired does not mean you are no longer credit worthy.

It is worth getting advice from an accountant and/or solicitor on implications of a mortgage on any inheritance tax implications for you and your family and ensuring your Will also reflects any arrangements you put in place.

One client we acted for recently, who wanted to help her two children with deposits for their first properties, summed up her plans nicely, “I want my children to have the benefit of their inheritance whilst they really need it and whilst I can see them enjoy it.”

Another retired client, buying a beautiful house in Southern France, told us “I had no idea I could get a normal mortgage, this has been game changing for my wife and I.”

Products such as Lifetime Equity Release mortgages and Retirement Interest Only mortgages, which have different qualifying criteria, have their place in the market and can also be life changing for clients needing to unlock equity but who perhaps have less in retirement or investment income. These products are usually more costly and can also have hefty repayment charges associated with them. They are great under the right circumstances but need an editorial of their own to better explain the pros and cons.

My message here is really to explore all your options, as with anyone taking a mortgage, before making a decision as to what product works best for you.

Product pricing in the market place today does vary widely but here are some examples of the types of deal out there today.

An Example Scenario

Clients have recently retired, aged 69, and own their home debt free. Now wanting to unlock equity to buy a holiday home in Italy. Looking to borrow £250,000, 50% of the property’s value. Joint pension/investment income can be evidenced between at £75,000 per annum. The mortgage they want is a Repayment mortgage with a 20 year term.

Source: Mortgage Brain. Figures for illustrative basis only and subject to change.

* Please ask us for a personal illustration

Think carefully before securing any debt against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.

Holdsworth Financial Ltd is authorised and regulated by the Financial Conduct Authority. Our FCA number is 837784

For further information, please refer to our website at www.holdsworthfinancial.co.uk