It can seem like lenders and the property industry focuses on first-time buyers and families buying homes when it comes to mortgages. But what about older people looking for a mortgage for an investment property if you’re coming up (or past) retirement age?
You’ll be glad to know that you will be able to get a mortgage later in life, including if you’re looking to get a mortgage on a buy-to-let property as an investment.
If you’re retired, no longer working or over 65, getting a mortgage will depend on your financial situation. Lenders will look carefully at your finances to decide whether they are comfortable with letting you borrow and, if so, how much. Broadly, this will include looking at your savings, investments, pension, assets, wealth and your liabilities. Lenders will also want to understand your spending and outgoings.
Your financial history will also be important during the mortgage application process. Expect to be asked to share information about your credit history, track record managing buy-to-let properties and other financial information. Lenders will be looking for information and data that will provide detail and comfort about your ability to manage this type of investment and more broadly, your financial stability.
All in all, mortgages later in life are more and more common, and many lenders will be happy to let you borrow. That said, expect a little bit more scrutiny, be prepared to put forward more paperwork and answer more questions as part of the mortgage process.
Why are there age limits on Buy-To-Let mortgages?
When looking at buy to let mortgages, mortgage lenders will consider mortgage terms which run past your anticipated retirement age. The upper age limit is different for each lender – most lenders will probably set a maximum mortgage term somewhere in the 75-85 age bracket, with some lenders allowing age at the end of the term to be 105, and a few lenders do not have a maximum age. It is important to remember that any lending is subject to lending criteria and your mortgage adviser will be able to discuss options available to you in detail.
While you are free to apply for a mortgage (buy-to-let or otherwise) at any time, the upper limit on mortgage terms will affect the mortgage process, including which lenders you approach and the total length of your mortgage.
Borrowing in later years for a buy-to-let property
If you want a buy-to-let mortgage as you retire, you will naturally want to think carefully about your finances, and lenders will also assess you carefully on this point.
Buy-to-let mortgages usually operate on the basis that you only repay interest. Every month, you will be liable to pay the interest on your mortgage, and when the mortgage term comes to an end, you will need to repay the ‘base’ loan amount in full. Usually, you’ll do this by selling the property to repay your lender. You can of course take the mortgage on a capital and interest basis, where the balance reduces each month, so in effect the mortgage is cleared at the end of the term.
For buy-to-let properties, there’s usually less focus on how much income you have available to make the mortgage repayments, which will work in your favour if you are retired. When it comes to how much you can borrow, lenders will primarily focus on the rental income that the property will generate, which you will, in turn, use to cover the loan interest and other charges. Even so, making sure you can pay the mortgage on your buy-to-let property will be critical, and lenders will want to look at how you’ll make repayments if the property is vacant. If you have a good income from your pension or from other investments, this will help satisfy lenders.
The loan-to-value (LTV) ratio will also be central to your application if you’re retired and want to invest in a buy-to-let property. Your investments, assets, any other property you own, and your wider financial position will also give confidence to some lenders. However, the lenders that look closely at these details probably won’t be standard high street mortgage providers. A mortgage broker will be able to help introduce you to the lenders who are more likely to think about these elements.
Lenders will also consider risk carefully. If you’re older and want a mortgage for a buy-to-let property, you’ll find it easiest to get a mortgage if the property will be easy to rent. Getting a mortgage on a house or flat in a popular area where rentals are in demand will be easier than a property that the lender thinks won’t appeal to most mainstream renters or has a very niche market. That means that most lenders want to see the property you want to buy isn’t something like a listed home, a huge estate or a quirky home that will only appeal to a few people. The reason for this is twofold: lenders will want the property to be appealing to a large pool of renters (reducing the time it could potentially be empty) and ensure the property easy to sell when the mortgage term is completed.
Risk will also include if you have other debts, have mortgages on other properties, or don’t have a good credit score. On a personal level, you’ll also want to think about how you will repay the loan at the end of the mortgage term. While most people usually sell the property to pay back the loan, you’ll want to make sure you won’t be left high and dry if your home takes longer to sell than expected or if you aren’t able to sell the property for as much as you wanted.
With your mainstream Buy To Let lenders, generally a 25% deposit will suffice as long as the rental income calculation shows the loan to be affordable. It’s also wise to note that different lenders have different calculations and it is not a one fit all scenario. Private banks may require a larger deposit and offer a shorter term; however, they may offer more lucrative rates and may be happy to use your personal income to top slice the affordability so you can purchase the investment property.
You’ll also want to think about tax. This means considering both income tax (due on rental income) and capital gains tax (applicable when you sell). Legal advice will be a standard part of purchasing a property, but also factor in getting specialist advice on the tax and legal implications of buy-to-let property and any income that arises from it.
It’s essential to think about any mortgage carefully, but especially a buy-to-let mortgage later in life. London FS will be happy to chat with you about your financial situation and give you insights on how lenders will assess you, the strengths and weaknesses of your case, your options, and any risks.
Why use a mortgage broker if you’re over 65 and looking for a buy-to-let investment?
Getting a mortgage when you’re older won’t be as straightforward as when you’re younger and have a regular monthly income. Dealing with lenders yourself, understanding what a lender needs and which lender to talk to, will be difficult if you work alone. A mortgage broker will be able to provide personalised assistance and advice, negotiate a better deal for you and help you with the application process.
Mortgage brokers will be able to help you negotiate more effectively or get a better deal by going to specialist lenders who you might not know about or who you won’t be able to approach directly.
Lenders will have different rules for older borrowers, and some may not lend to retirees at all. When you’re approaching lenders directly, you may waste time, approaching multiple lenders who might not even consider your application. Using a mortgage broker will help you see the process through faster as well as simply making getting a mortgage easier to manage.
There will also be times when you might fall outside of a lender’s ‘standard’ rules for getting a mortgage later in life. However, some lenders may let you borrow if you have an excellent financial situation or lots of assets you can secure your mortgage against. Brokers will know who these lenders are – some of whom may not operate in the open market – and will be able to approach them on your behalf.
At a glance: how can a mortgage broker help you if you’re over 65 or retired?
• Help you navigate the mortgage process from start to finish
• Negotiate with lenders for you to get you the best mortgage
• Know which lenders will be the best match for your needs
• Access specialist lenders who might consider unusual circumstances
• Save time
• Help you with your mortgage application
• Explain your options in more detail, so you’re well informed and able to make the best decision
If you have any questions about getting a buy-to-let mortgage if you’re retired, approaching retirement or over 65, get in touch. The team would love to hear from you and will be available to have an informal chat about mortgage options that would work for you, the process, our experience and answer any questions you have.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
The Financial Conduct Authority does not regulate some forms of buy to let, secured loans, commercial finance, bridging finance, overseas or offshore mortgages and will writing.
Nothing contained within this communication should be construed as advice. Please seek individual professional advice relating to your personal circumstances.