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Can I qualify for a mortgage if I've retired?
It all depends on your personal circumstance. Many people who have retired are able to get a mortgage and move into another property. It's important that you are able to fund your retirement and pay for the mortgage comfortably, to ensure you don't get yourself into financial difficulties.
During retirement, lots of homeowners decide that they need a change, whether that’s in lifestyle or surroundings. It’s also common for retiring homeowners to downsize and buy a smaller property that will be easier for them to maintain. If you’ve been looking at buying another house in your retirement, but you’re not sure if you’d be approved for your mortgage, We Buy Any House have looked into it to give you the answers you need.
What could stop be getting approved for a mortgage?
When you go through the application process for a mortgage, there are several different assessments that you will need to pass in order for your application to be approved. The step that retired homeowners may be concerned about is the income assessment, as in retirement, your income tends to be lower than your income when you were working. However, providing you can pass the income assessment, your retirement income shouldn’t be a big issue in your application process. You will just need to make sure that your income can comfortably cover your monthly mortgage payments along with your general living costs.
What types of mortgage can I apply for once I’ve retired?
A lifetime mortgage is a good option for retired homeowners, as it will allow you to release equity once you’re over 55. It can be helpful for those who want to stay in their house but access the money tied up in the property, to either fund your retirement or to use for other reasons, such as investments or travel. A lifetime mortgage allows you to retain ownership of your house but not have to pay the loan or any interest until the house is sold when you pass away or go into long-term care. This option can appeal to some retiring homeowners, but will mean that the house will need to be sold when you die and stop you leaving it as an inheritance to your family.
If you are interested in buying another property, you can look at applying for a retirement interest-only mortgage. This will allow you to borrow the money you need for your new house and only pay the interest each month to let your finances to go further. This style of mortgage can be suitable for homeowners who don’t want to leave their property as an inheritance when they die as the house will need to be sold to pay back the mortgage, but if you want to have a property to leave to other family members in your will, you will need to consider buying outright or choosing a mortgage that you will pay off in full.
I want to downsize; will I need a mortgage?
If you want to downsize in your retirement, you’ll likely be able to sell your house and use the proceeds to buy a smaller property, eliminating the need for another mortgage. However, this will depend on several things. Do you own the property that you live in outright? If you do, you should be fine. If you’re still paying the mortgage off and you’ve decided you want to sell, you will need to pay back the remainder of the mortgage from the proceeds of the sale. You may have other ties to the house, for example, a secured loan. You may be able to transfer this to your new property, but this could be a lot of work and would depend on the value of your new property and the amount that you’ve borrowed. You may find that it’s easier to simply pay back this loan in full when you sell the house to clear any debt. If you’re in this situation, you may not have enough after you’ve paid the various bits that you need to from the sale to buy another property outright. At this point, you might need to consider applying for another mortgage.
Why do retiring homeowners downsize?
Downsizing is a natural step for retiring homeowners, as they may not utilise the space they have like they once did, and want to move somewhere smaller and easier to maintain as they get older. Downsizing can also save money long term, depending on which area you move to and what property you’re looking to buy. This can be ideal for retiring homeowners, as your income will change and is likely to be less than when you were working. It is important to remember, however, that downsizing has several upfront costs that you’ll need to keep in mind, especially if you’re planning to move to save money. Not every homeowner chooses to downsize when they retire, but if you’re thinking of spending your retirement travelling you might decide that you don’t need a large house if you’re not going to be there that often.
What if I want to buy a bigger house?
Homeowners will often choose to upsize, and while this is less common in older homeowners, it’s still a decision that many make. You will need to spend some time assessing your income and outgoings and see what you’ll be able to afford and what you’ll likely be approved to borrow. If you’re able to put down a larger deposit, this will benefit you too.
Overall, there are several different options for retired homeowners to apply for mortgages that should work for them. If you’re concerned about being declined for your application, you should speak to your mortgage broker. They can let you know if they foresee your concerns being an issue, and can suggest other mortgage types that might be more suitable for you depending on your personal circumstances.