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Money & Rights

Buying a home in later life

Dilpreet Bhagrath, mortgage expert at Trussle, has advice for older borrowers looking to buy a home

BUYING A home in later life has always been difficult. From the banks’ perspective, there’s a higher risk, as borrowers may not be able to support mortgage payments once they retire, or may encounter health problems which restrict them financially.

Times are changing, however. People are living longer, working later, and the traditional image of retirement has been turned on its head. Thankfully, lenders are beginning to cotton on, as we’re seeing more flexible mortgages designed to accommodate every buyer, regardless of age.

But navigating this market is not easy and it’s crucial that buyers make decisions that don’t adversely affect their retirement. So, whether you’re upsizing, downsizing or escaping to the country, here are a few tips to make the process run smoothly.

Find the right product

Lenders aren’t as rigid as they used to be when it comes to age. Some, such as Metro and Halifax, have changed their lending terms to accommodate customers up to the age of 80.

HSBC has no maximum age at the end of the mortgage term, which means the underwriter will review individual circumstances before making a decision.

There are a few other options that can make life easier for retirees who have mortgages – some lenders offer lifetime mortgages and equity release mortgages, releasing some of the wealth tied up in a home, allowing more money to be spent in retirement.

Most fixed mortgage deals allow overpayments of up to 10 per cent of the balance each year without being charged, shortening the term and so reducing the overall amount of interest you pay back. Using a free online mortgage broker with wide access to the market, such as Trussle, can help to guide you through the process.

Have a financial plan

It’s important to consider your financial future when taking out a mortgage, and it’s essential later in life to consider how paying off a mortgage each month might affect your retirement plans, taking into consideration that there will be a change to your lifestyle, income and outgoings.

Before making a decision, consider what your financial situation is and your retirement goals – ultimately your decision needs to support your lifestyle choice.

Consider the length of your mortgage and ability to overpay

Buying a home later in life means you may have less time to pay off the debt. If you have savings, it’s worth paying off as much of the mortgage as you can so you’re not passing debt onto loved ones. Putting down a larger deposit, or overpaying when you can, will also help to reduce the time it takes to pay off the loan, saving you money on interest.

Before making any overpayments, however, check with your provider if there are any early repayment charges (ERCs), as there may be limits on how much you can overpay.

Have your paperwork ready

Organisation is vital, and having the right documents to hand will help the mortgage application process run smoothly. Most lenders will carry out a plausibility test to check whether you’re able to stay in your job past the State pension age and, if this doesn’t apply to you, what your plans are. They’ll assess different types of incomes for retirees, including investment, maintenance, private pension, State pension and benefits, and will need evidence of each income source.

You’ll also need to provide bank statements, proof of ID and address, as well as proof of deposit if you’re buying a new home or details of your last mortgage statement if you have one.

Bad credit

If you’ve picked up a black mark on your credit score over the years, it could affect your chances of securing a mortgage. If you’re using a mortgage broker, be honest with them so they can choose the right mortgage lender and deal based on your circumstances.

If you have a low credit score, taking small steps such as paying monthly bills on time and making sure you’re on the electoral register are easy ways to start improving it.

Downsizing

Deciding to sell the family home can be difficult, but downsizing and freeing up equity is a great way to make the most of your retirement and even potentially help children or grandchildren get on the property ladder.

Often, moving to a smaller home means lower maintenance costs, including Council Tax, other bills, and potentially lower mortgage costs. For some, downsizing might enable you to pay off your mortgage entirely, and buy a property outright. At Trussle, we help a lot of people going through the downsizing process to find a mortgage deal that’s right for them and their new home.

Buying a home can be daunting but it should also be rewarding, whether you’re a first-time buyer or buying in later life.

For those thinking about a later-life purchase, the most important question to ask yourself is: what impact will this have on me in retirement? If you’re struggling to answer that question, seek the advice of experts before rushing into purchasing a property.

What do you think to this advice? Have you bought a home in later life? Do you have some advice to share?

Let us know what you think and share your experiences with us and others. Just follow us on FacebookTwitter, Instagram and YouTube

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