Posted by Laura Sheath
Can a Pensioner Get a Mortgage to Buy a Retirement Living Property?
You may be pleased to know that despite variations in lending criteria, an older adult can get approved for a later-life mortgage - even if their income comes from a pension or benefits.
This older person’s mortgage guide explains how to apply for a mortgage to buy a retirement living property, including how much deposit you might need and how to find a retirement living property to buy.
Can a retired person get a mortgage?
Yes, though the likelihood of you getting approved for a mortgage to buy a retirement living property will be based on whether you can meet the eligibility criteria of your chosen lender.
A selection of lenders in the UK provide mortgages for older adults. However, the stability of your income, how close you are to retirement and whether your income is likely to reduce when you retire, will greatly impact your choice of lender.
It’s possible to get a mortgage as an older adult, even if you no longer work, as the income from your pensions, benefits and savings can all be used to calculate the risk you pose as a borrower.
Ultimately, a lender needs reassurance that you’re a trustworthy borrower with enough income to repay your mortgage balance.
How does age affect a mortgage application?
Some mortgage lenders have upper age limits that can affect whether you can apply.
Age can be important for lenders when considering your application. That’s because if you’re over 65, it’s more likely that you’ll be reliant on your pension or possibly benefits like Attendance Allowance as income.
Most lenders accept income from pensions and benefits but it’s the amount you have coming in and whether the income is likely to continue throughout the term of your mortgage that affects whether you’ll be approved.
Does being retired affect your ability to get a mortgage?
Usually, though not always, after reaching 65, your mortgage options will decrease, giving you a smaller pool of mortgage rates to choose from.
For pensioners over 70 or 75, accessing competitive mortgage options can become even more difficult.
Finding a mortgage broker that specialises in mortgage applications for pensioners can help you find the lenders that are more suitable for you.
Will you need a short-term mortgage to buy a retirement living home?
The average term length of a mortgage is usually 25 years. Depending on your age and affordability, you may find that mortgage lenders suggest a shorter term length of 10-15 years.
A shorter term length will result in your mortgage repayments being higher per month, as the amount you’re borrowing is paid back within a shorter time frame.
This can have a significant impact on your ability to comfortably repay what you owe.
Mortgage lenders carry out affordability checks to determine whether your income can cover repayments but it’s sensible to calculate it yourself too, considering other outgoings you have and how much you could be left with for yourself.
How much is a retirement living property to buy in 2024?
The cost of a retirement living property varies across the UK based on the size of the property, the standard of retirement living and the demand for older person's housing in that area.
Retirement living apartments in London, for example, can cost between £350,000 - £5,000,000, whereas, in other areas of the UK, prices can vary between £150,000 to £400,000.
Watch the short video below to hear more about the true cost of retirement living properties.
How much deposit would an older person need to get a mortgage?
The amount of deposit required to be eligible for a mortgage depends on:
- Your choice of lender
- The market value of the retirement living home you want to buy
- Your income, including how likely it is to fluctuate or decrease during the term of your mortgage
- Loan to value (LTV) of the mortgage product
- Your age
- The property type (some lenders ask for higher deposits on flats)
- Your credit history
- Lenders’ minimum and maximum loan amounts
How much will I need to borrow to buy a retirement living flat?
That will depend on the market value of the retirement living property you want to buy.
The size of your deposit (or equity) will also affect how much you’ll need to borrow from a bank, building society or other mortgage provider.
The higher your deposit, the lower the loan-to-value ratio. Your loan-to-value (LTV) is the ratio of the amount you borrow to buy a property against the value of the property, expressed as a percentage.
As an example, let’s say the property you want to buy is valued at £250,000.
Assuming you put down a 20% deposit of £50,000, you would need to borrow £200,000 to buy the property.
If you have 20% and you're borrowing 80% from a mortgage lender, your LTV would be 80%.
- Typically, loan assessments with high LTV rates are considered higher-risk loans
- Usually, though not always, mortgage products with a higher LTV rate have higher interest rates
- Some borrowers put down a higher deposit so they can get a mortgage with a lower LTV rate (and a lower interest rates)
How much would the repayments be for a mortgage to buy a retirement living home?
The amount you could repay for an older person’s mortgage will vary depending on the market value of the home, the interest rate you’re eligible to apply for, the age you’ll be at the point of full repayment and the term length.
Following on from the above example for a £250,000 home, if you were to take out a 15-year capital and repayment mortgage of £200,000 with an interest rate of 6%, your monthly repayments would be £1,688 a month.
However, if you’re a younger borrower, hypothetically aged 55, you may be able to apply for a mortgage with a longer term length of 25 years. Doing so could stretch your repayments over a longer time frame, meaning your repayments for the above example could be £1,289.
It's important to note that this is just an example, and your actual mortgage repayments may be higher or lower depending on your circumstances.
You also need to consider that by stretching out your repayments, you will likely repay more in interest.
Deposit example for a retirement living property
| Deposit size | Monetary value | Mortgage capital balance | Loan-to-value ratio (LTV) |
|---|---|---|---|
| 10% | £25,000 | £225,000 | 90% |
| 15% | £37,500 | £212,500 | 85% |
| 20% | £50,000 | £200,000 | 80% |
| 25% | £62,500 | £187,500 | 75% |
| 30% | £75,000 | £175,000 | 70% |
| 35% | £87,500 | £162,500 | 65% |
| 40% | £100,000 | £150,000 | 60% |
| 45% | £112,500 | £137,500 | 55% |
| 50% | £125,000 | £125,000 | 50% |
Mortgage lenders that approve applications for older borrowers
The information below is subject to change at any time and you should always check the latest rates with a qualified mortgage broker.
- Aldermore – is open to applicants with an occupational pension, but your State Pension cannot be the only source of income.
- Earl Shilton Building Society – income can come from a private pension, but there will be a maximum LTV of 70% if more than 50% of income comes from your pension.
- Santander – will consider a private pension as primary income but only if the payments are paid monthly (or more frequently).
How to apply for an over 55s mortgage
1. Find a broker
Heading directly to your bank for a mortgage might feel like the natural step, especially if you’ve been a loyal customer for years.
However, if you neglect to compare the other options that you could be eligible to apply for, the result could be a mortgage that is more expensive or an agreement that offers less flexibility.
Many lenders do not advertise their rates on comparison sites and others can only accept mortgage applications through intermediaries such as mortgage brokers.
To access a wider range of mortgage lenders and deals, find a mortgage broker that specialises in mortgage applications for older borrowers.
2. Check your eligibility
Lenders will consider your age, income, credit score, and other factors when deciding whether to approve your application.
Before you apply for a mortgage, it's important to check your eligibility with a mortgage broker who should be able to carry out a soft credit check that won’t affect your credit score.
3. Find a lender
Once you know you're eligible for a mortgage, you'll need to find a lender that offers mortgages for retirement-living properties.
Do your research and compare the interest rates, fees, and terms of different lenders to find the best option for you. Think about how a fixed mortgage term could affect your finances and whether you want the flexibility to extend your mortgage term in the future.
4. Find a retirement living property on Autumna
Autumna can send you a free shortlist of retirement living properties near you. You can select your budget and request options that meet your specific needs too, so if you want a retirement living provider that allows pets, we can help with that.
5. Take your time
Applying for a mortgage to downsize into a retirement living home is a big decision.
You might be in a rush to move because of personal reasons, perhaps a decline in health or a need for more security; however, pausing to reflect on how a new mortgage agreement could affect you financially is always a good idea.
6. Apply for the mortgage
Once you've found a lender and gathered your documents, you can apply for the mortgage. You'll need to provide information about the retirement property you want to buy and your income and outgoings.
7. Wait for approval
After you've submitted your mortgage application, you'll need to wait for the lender to approve it. This process can take several weeks and sometimes months, so be patient.
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People also ask
Can I apply for Older Persons Shared Ownership (OPSO) to buy a retirement living home?
This scheme can be helpful for older borrowers on a lower income, as the repayments for the mortgage are typically lower versus repayments for 100% ownership of a property.
With OPSO, pensioners can buy a home by purchasing a portion (or a share) between 10% and 75%. If you buy less than 75% of the house, you’ll pay rent on the remainder.
Once you own 75%, you don’t have to pay rent on the remaining share.
Should I consider renting vs buying a retirement living property?
Lots of retirement living providers including McCarthy Stone, Pegasus, Retirement Villages, Richmond Villages and Belong offer their apartments through a rental agreement. If you’re unable to apply for a mortgage because of your circumstances, be it your age or lack of deposit, renting might be a better solution.
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