Can I get a mortgage as an older borrower?
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I’m age 62 and have inherited a small amount from my mum. I would like to use it as a deposit to buy a rental property to generate some additional income on top of my pension when I retire next year. I have 40pc to put down as a deposit on a small family home. Would I be able to get a mortgage that I’d still be paying back into my eighties?
Diane Fish of Smith & Pinching responds:
Lenders are becoming more flexible about lending money to older borrowers and we’ve seen this in buy-to-let mortgages as well as straightforward residential mortgages. Some will accept mortgages that will be paid off up to age 85, although others limit it to age 75. A few lenders have no upper age limit.
However, you will need to meet the lender’s eligibility requirements in terms of your income levels, and lenders may want to see details of your personal income in retirement on top of the prospective rental income to give you a cushion in times when there’s no tenant in place. Your own residential status will also form part of the lender’s required criteria.
Your 40pc deposit will certainly help you get a competitive rate for your mortgage. Many buy-to-let mortgage providers will consider a 75pc loan-to-value mortgage, but a higher deposit is definitely an advantage.
Buy-to-let mortgages are normally repaid on an ‘Interest Only’ basis so the overall term will have no effect on the monthly payments required. An interest-only mortgage may also help with rental voids as the payments will be lower than with a repayment mortgage. The ongoing rental income and the uplift in value of the property are normally the main reasons for considering an investment property as a long-term investment.
It's important to remember that with an interest-only mortgage, the capital must be repaid at the end of the mortgage term, either by selling the property or by other means.
I recommend that you take independent mortgage advice at this stage to ensure that you can successfully enhance your retirement with your rental property. An independent adviser will help you work out what is affordable and will have access to lenders across the mortgage market, ensuring that you are able to find the most suitable product for your circumstances.
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Your home may be repossessed if you do not keep up payments on your mortgage. There will be a fee for the mortgage advice. The precise amount will depend upon your circumstances, and the type of lending taken. Smith & Pinching’s minimum advice fee is £700. Any opinions expressed in this article do not constitute advice.
For more information, please visit www.smith-pinching.co.uk