How To Get A Mortgage If You Are An Older Borrower
The maximum age to get a mortgage varies depending on the lender and with some retirement mortgages there is no maximum age at all instead the primary consideration is your unique financial circumstances in terms of earned income, pension income and credit history. Age is not always the ultimate factor with certain types of mortgages too some lenders of buy to let products, for example, dont have a maximum upper age limit. Our team of expert retirement mortgage advisors have access to the whole market and can discuss, for free and with no obligation, the best options for you. Weve been helping people prepare for retirement by providing impartial, expert guidance for over 20 years so you can trust our team to assess your own personal situation and give you honest advice. Here are some answers to our most frequently asked questions:
Can a retired person qualify for a mortgage?
We have many customers asking us, Can you get a mortgage when retired? The answer is yes, you can. There are several options that we can look at that may best suit you based on your current situation, from interest only retirement mortgages that are dependent on your retirement income to lifetime mortgages that are largely based on your property value.
What is the maximum age to get a buy to let mortgage?
Is there an age limit to get a mortgage?
Can you get a mortgage beyond retirement age?
Can I get a mortgage at 60?
Can a 60-year old get a 30-year mortgage?
Your Assets Income And Retirement Accounts
Most lenders like to see evidence of steady, reliable income from borrowers and if youre no longer working, it might be difficult for you to show regular cash flow when you apply for a mortgage loan or refinance.
Luckily, many mortgage lenders now allow retirees to use income from their retirement assets to qualify for home loans. This includes:
- Investment accounts
The type of investments you have may impact how mortgage lenders view your total income as a borrower. If you have accounts made up of bonds, stocks or mutual funds, lenders can only consider 70% of the value of those assets due to their volatility, so you may not qualify for as large of a mortgage as you initially thought.
For your retirement accounts to help your application, youll need to demonstrate that you can draw on these accounts without penalties for the next 3 years to support both normal living expenses and loan payments. Youll also need to provide extra documentation on top of the standard mortgage paperwork to show you have access to these accounts.
Not retired yet, but planning on it soon? Since lenders want to see evidence that senior citizens have finances to cover at least the next 3 years you might be denied if you inform lenders you plan to retire sooner. Where possible, it might be best to wait and apply once youre fully retired and can access your retirement accounts.
What Is The Oldest You Can Still Get A Mortgage
Theres no legal limit on the maximum age you can be when applying for a mortgage. However, many lenders impose their own rules.
Typical mortgage age limits are:
-
under 65 to 80 to take out a mortgage
-
under 70 to 95 when the mortgage term ends.
So even if you are below the maximum age when you get a mortgage, you might have to opt for a shorter term. For instance, if you get a mortgage at 65, lenders might say it can only last 15 or 20 years, meaning monthly repayments would be higher, though, on the upside, you would pay less interest.
Don’t Miss: What Would The Mortgage Be On A 500 000 House
What Factors Into My Personal Mortgage Rate In Canada
Factors such as credit score and income play a big part in qualifying for the lowest interest rate. The riskier a borrower appears, the higher the interest rate can be. Rate is definitely not the most important aspect of a mortgage, however, as many rock-bottom rates often come from no-frills mortgage products. In other words, even if a borrower qualifies for the lowest rate, they must often give up other features such as prepayments and porting privileges when opting for the lowest-rate product.
There are many other ways to save money over the mortgage term instead of taking the lowest rate, including rounding up mortgage payments or making lumpsum payments when bonuses, etc are received throughout the year. Its important, however, not to exceed the allowable limit on annual extra payments with your lender.
How Do I Confirm My Pension Income
When you are retired you will likely receive your income from several sources. You could receive several pension incomes, CPP , OAS , RIF , etc.
To verify these sources of income, a lender will ask for documents to confirm the numbers. They will ask for documents like these to confirm income:
- 3-months bank statements
- 2-years T-slips
- 2-years Notice of Assessments
If you have a large Registered Savings Plan that you are drawing income from, then your lender will ask for this as well.
All these documents will be reviewed by your lender and then used to determine the total mortgage you could qualify for. In some cases, if your investment portfolio is large, they will make exceptions to the 39% & 44% that I mentioned above.
For some lenders, depending on how much money you have down you may qualify for higher mortgage amounts. For example, if you have 50% down when you purchase a home, the lender can be more lenient with the 39% and 44% calculations.
Read Also: How Much Should You Pay A Mortgage Broker
How Does A Retired Person Qualify For A Mortgage
Most lenders consider pension, Social Security and investment income as your regular income. You may also be able to include your annuity, survivor or spousal benefits and retirement account income as long as you can prove it’ll continue for at least 3 years. Your assets can contribute to your ability to get a loan.
Determine Your Income After Retirement
A homebuyers income is another important factor when applying and qualifying for a mortgage. When evaluating a mortgage application, lenders typically require income documentation going back two years. However, if you retired more than two years ago, this may not be as straightforward as providing copies of your W-2s. Instead, youll need to show evidence of Social Security, pension income, dividends and interest payments.
Alternatively, you can rely on your retirement or other assets to establish a monthly income using one of two methods:
- Drawdown on retirement. A drawdown on assets method is considered the best option for retirees without any Social Security or pension income. Borrowers who are at least 59.5 years old can use retirement account withdrawals as proof of income. Under this approach, a retired homebuyer who withdraws $5,000 from an IRA each monthfor a minimum of two monthsis seen as having $5,000 in monthly income.
- Asset depletion. To use this method of income, add the current value of all your financial assets and subtract any portion of the assets you plan to use for a down payment or to cover closing costs. Finally, calculate 70% of the remaining value and divide that number by 360 months to calculate income over the course of a 30-year mortgage.
Recommended Reading: What Is A Mortgage Originator
Mortgages For Seniors On Social Security
Social Security income for retirement or long-term disability can typically be used to help qualify for a mortgage loan.
That means you can likely buy a house or refinance based on Social Security benefits, as long as youre currently receiving them.
SSI should be counted along with retirement funds and other liquid assets to calculate the borrowers total qualifying income.
Since SSI is typically non-taxable, it can also be grossed up. That means the lender can increase the qualifying amount by 10% to 25% and help you qualify for a larger monthly mortgage payment.
For a lender to count Social Security income toward your mortgage, it will need to be documented via an SSA Award letter or proof of current receipt.
If the borrower is drawing Social Security income from another persons work record, theyll need to provide the SSA Award letter and proof of current receipt, as well as verification that the income will continue for at least three years.
How Much Can I Borrow On A Retirement Interest Only Mortgage
In general with both retirement mortgages and standard mortgages, you can borrow less with an interest only mortgage than when you are also repaying the capital. This could mean you can borrow 50% of the value of your home interest only, but you could borrow 65% if you were repaying the capital too.
Also Check: How Much Would Mortgage Be On A 500 000 House
Is It Easy For A Pensioner To Get A Mortgage
For most pensioners, the short answer is no. Lenders will want to know that you will have a steady income stream to make all your repayments, which can be difficult to prove if youre over 65 and soon to be a pensioner but it is possible. You will need to show that your pension pot or other investments will be able to fund the repayments, and it can help to provide a well-estimated retirement date.
In fact, some providers will request the current value of your pension pot. You can show them your workplace pension forecast, annuity statement or bank statement .
Lenders will also want to know that you have a good credit history. It is important to check your credit score before you apply for a mortgage to see if there are any areas you can improve.
Can You And Should You
Can you qualify for a mortgage loan? And, more importantly, does taking on such a huge debt after retirement make financial sense?
The answer to the first question depends on your income and debts. Mortgage lenders can’t deny your application for a loan because of your age. If you can prove that you can afford a monthly mortgage payment and you have a solid credit score, lenders will approve your application.
The more difficult question is the second one: Even if you can qualify for a mortgage loan in your 60s or even in your 70s, should you take on the financial burden of monthly home-loan payments at such a late stage in your life?
It’s a question without an easy answer. Jeremy Heck, a consumer law attorney at Columbus, Ohio’s Luftman, Heck & Associates, often works with clients struggling with financial challenges. He says that seniors should think carefully before applying for a new mortgage loan.
Also Check: How To Get A Mortgage License In Florida
What Mortgage Options Are Available For Over 70s
There are several different mortgages available if youre over the age of 70. Which mortgage type is best for you will depend on your attitude to risk and the reasons you want a mortgage, such as:
-
To improve your existing property
-
To release cash tied up in your home to give you some additional income in retirement
Below are the four main mortgage options you can choose from.
Donât Miss: How Much Do I Need For A Mortgage
Should You Have A Mortgage In Retirement
Ideally, you should not have a mortgage in retirement. This is because large monthly mortgage payments are more difficult to cover in the absence of steady, reliable income. Oftentimes, retirees are forced to make withdrawals from their retirement funds to cover mortgage payments rather than saving that money for necessary living expenses down the line.
That said, paying off your mortgage before retiring may not always be possibleor wise. For example, using a large portion of your savings, retirement funds or other investments can leave you without an emergency fund.
Likewise, making large withdrawals from certain investment accounts can lead to costly tax implications and penalties, and may cost you more in the long run. You may also be able to earn a higher rate of return on your money by keeping it invested, rather than using it to pay off your mortgage.
Ultimately, the decision to enter retirement with a mortgage depends on the homeowners unique circumstances. For that reason, we recommend consulting with a financial advisor before committing to a mortgage or using retirement assets as a down payment.
Also Check: Can You Roll Student Loan Debt Into A Mortgage
Using A Reverse Mortgage In Retirement
A reverse mortgage is a special program that allows seniors to use their homes equity to create an income source, a line of credit or a combination of several options. With a reverse mortgage, you can:
- Take a lump-sum payment to boost your cash reserves and secure a fixed rate
- Choose regular monthly payments for the life of your loan
- Pick a set number of months you want to receive monthly payments
- Select a line of credit and use the funds as you need them
- Combine a line of credit with a monthly payment for as long as you own the home
- Add a line of credit to a monthly payment you receive for a set time period
Can a retiree get a mortgage?
Yes, as long as their income and credit meet the above guidelines.
What is the age requirement for a house?
There is no maximum age requirement for a home. However, there is a minimum age requirement of 62 if you apply for a reverse mortgage.
Can you get a mortgage with only Social Security?
Yes. As long as you can verify recent receipt of it and an award letter confirming your current award amount.
Can you get a mortgage with no job?
Yes. A job is not required to qualify for retirement mortgages.
Can you buy a house while on SSI?
Yes. However, if you are receiving survivor benefits, you must also prove youll get the income for the next three years.
Are retirement mortgage interest rates higher than regular rates?
No. Interest rates for retirees are based on the same factors as any other mortgage.
Variable Mortgage Rates Vs Fixed Mortgage Rates
A variable-rate mortgage fluctuates with the nestos prime rate throughout your mortgage term. While your mortgage payment will remain the same throughout your term, your interest rate may change based on market conditions. So, if the prime rate rises or falls, this impacts the amount of principal you pay off each month. When rates on variable-rate mortgages drop, more of your payment is applied to your principal balance. And, conversely, if rates increase, more of your payment will go towards the interest portion of your mortgage.
A fixed-rate mortgage keeps your interest rate steady over the term of your mortgage. Historically, variable rates have paid off for Canadians over time, as a variable-rate mortgage often allows you to take advantage of lower rates as the interest rate is calculated on an ongoing basis at a lenders prime rate minus a set percentage. Still, many conservative borrowers would rather pay more for the security of a fixed rate option than have to worry about the fluctuation of a variate rate alternative.
Theres no doubt that the five-year fixed-rate mortgage is the most common choice selected by Canadian homeowners. But, this isnt the best option for everyone, regardless of its popularity. Your decision should be based on your tolerance for risk as well as your ability to withstand increases in mortgage payments. This is where our expert support is even more invaluable.
Recommended Reading: How Much Do Mortgage Brokers Charge
How To Get A Mortgage As A Pensioner
Your first step is to gather information on your finances. Get a statement from your pension or annuity provider to prove your long-term income. You should also check your credit score.
Next, do some research about mortgages for pensioners. You will want to compare the age limits, interest rates, term lengths, fees, eligibility criteria and flexibility options of the various products. There are comparison sites to help you see what is available, but a mortgage broker can give you access to a wide market of lenders and help you choose the one that is best for you.
You then need to apply for the mortgage you want. Try to avoid applying for lots of products as each application will appear on your credit history and could harm your credit score. Again, a mortgage broker can take you through the entire application to help ensure you are successful.
Maximize Your Appraisal Value
The appraisal process is an important part of refinancing for borrowers. An appraiser will tour your property and give you an estimate of how much your home is worth. Maximizing your appraisal value can increase your chances of qualifying for a refinance. This is especially true if youre applying for a cash-out refinance.
Use these simple tips to increase your home’s value before your appraisal:
- Increase your curb appeal: Your curb appeal has an impact on the value of your home to home buyers. Take a tour of the exterior of your property and see where you can make improvements. Painting fences, planting flowers and power-washing walkways and hardscaping are some ways to improve your homes curb appeal.
- Your appraiser wont deduct points if you havent done the dishes or if you have a few books lying around. However, can make your rooms look larger and make your home feel more comfortable. Take a walk through each room a few days before your appraisal and make sure that everything is clean.
- Create a list of upgrades: Permanent upgrades youve made to your home increase your appraisal value. Create a list of improvements to give to your Some examples of permanent upgrades include installing a home security system, replacing old appliances or adding a pool. Dont include removable or aesthetic upgrades like painting a bedroom, putting up wallpaper, or hanging mirrors.
Read Also: How To Become A Mortgage Broker In Florida
