What are your property finance options for buying a house in retirement?
Many people choose to move home when they retire, either to downsize, relocate to a more desirable area or move into specialist retirement accommodation.
However, finding the right property finance to facilitate such a move can be tricky as many lenders have age limits on their mortgage products or require a higher regular income than many pensions provide.
The good news is that many lenders are becoming more accommodating to older borrowers and there are also a number of specialist lenders who offer property finance aimed at those in retirement. With that in mind, we look at the main options for those looking to borrow to purchase a retirement home.
Leasehold or freehold?
One of the first things you need to establish when looking at retirement properties is whether the place you want to live will be a leasehold or a freehold.
Many properties in retirement villages or sheltered accommodation will be offered on a leasehold basis, which can affect your ability to get some mortgages. Many retirees also opt for shared ownership deals, which again can rule you out from some mortgage deals.
If you are looking at leasehold properties, it is a good idea to speak to a broker with experience in dealing with retirement property finance. They will be able to advise you on the best options to match your borrowing needs and circumstances, helping you to get a good deal.
In the past, the maximum age limit for a mortgage tended to be either 70 or 75 for most high street lenders, but as people are living longer many mortgage companies are starting to up their age limits.
Nationwide now allow borrowers to take out a mortgage up to the age of 80 and keep it until they are 85 and other lenders are following suit. As more and more homeowners are needing to keep their mortgages into retirement, it is likely age limits on standard mortgages could increase further.
It is therefore worth looking at remortgaging if you are reaching the upper age limit for your existing mortgage as a new deal could allow you to keep borrowing for longer.
There are also various private, specialist lenders who may be willing to offer mortgages up to a higher age limit depending on your personal circumstances.
Retirement mortgages are a type of specialist mortgage product also sometimes known as lifetime mortgages. Unlike a standard mortgage which has a fixed loan term, the capital on a retirement mortgage only needs to be repaid when you move or pass away.
You will normally have to pay monthly interest on a retirement mortgage, but some offer the option to stop paying interest monthly once you pass a certain age and instead have the interest added to the total capital to repay.
This can help reduce your monthly outgoings as you get older.
Retirement mortgages can be a good option if you want the security of not having to worry about your mortgage again for the foreseeable future.
If you are planning to downsize in order to reduce or entirely pay off your mortgage, a bridging loan can help make this process easier and less stressful. It can also offer a solution if you have already found the perfect retirement property and don’t want to rush the sale of your current home.
Bridging loans are a type of short term property finance which can usually be arranged quickly and repaid over up to 18 months (or longer in some cases). With a bridging loan, you can buy your new retirement property before selling your old home, allowing you to secure the perfect property when you find it and giving you more time for a less rushed moved.
Once your new property has been purchased with the bridging loan, you can then sell your old home at your own pace, which can also often allow you to get a better price.
Once the old property is sold, you can use the proceeds to repay the bridging finance, leaving you with a smaller mortgage or completely mortgage free.
Compare property finance options for buying a house in retirement
Whatever type of retirement home you are buying and however you plan to finance the purchase, it is important to thoroughly explore your options so you get the best deal possible.
At Clifton Private Finance, we have a lot of experience working with retirees, helping them to find the most appropriate property finance options for buying a house in retirement. Whatever your borrowing needs and personal circumstances, we will work with you to find a solution that helps you achieve your retirement property goals.