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Can You Get a Mortgage Based on Pension Income?

If So, How?

If So, How?

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Can You Get a Mortgage Based on Pension Income? If So, How?

As the UK’s population continues to age, many pensioners are exploring taking out a mortgage. Whether you want to find your dream home or improve your current one, there are options available to help you. However, there are also a lot of misconceptions about securing a mortgage once you’ve retired, so we’re here to set the record straight and help you understand exactly how to get a mortgage as a pensioner.

Navigating Mortgage Options for Pensioners in the Property Market

When it comes to getting a mortgage as a pensioner, there are a lot of myths and misconceptions out there. So first, let’s look at some of the most common ones before we dig a little deeper into how you can go about getting a mortgage with your pension.

Pensioners can’t get a mortgage
This is simply untrue. Lenders are happy to provide mortgages to pensioners, providing they can prove they can repay the loan.

There’s a maximum age limit to get a pension
This is also untrue, there’s no set age restriction. However, some lenders will have their age cap to try and protect themselves.

It’s very difficult for a pensioner to get a mortgage
While it’s not necessarily any easier for a pensioner to get a mortgage than anybody else, it’s also not overly difficult providing you still meet the criteria when it comes to repayment capacity.

I can only get a standard fixed mortgage as a pensioner
Untrue. There are a number of mortgage types that are explicitly suited to those who have retired.

Can Pensioners Get Mortgages? Debunking Myths and Exploring Realities

One area that people can often get hung up on is the eligibility criteria for pensioners looking to take out a mortgage. Let’s take a look at the criteria you’ll need to meet at the minimum to qualify:

Some lenders will have a cap on the age they’ll release a mortgage. However, many of them are becoming more flexible with these limits and are willing to offer mortgages providing other criteria are met.

How your pension is structured could have a significant impact on your ability to get a mortgage as a pensioner. For example, if you have a drawdown arrangement this offers more flexibility as the economy fluctuates.

Frequency of payment
Lenders ideally want to see more frequent payments of your pension, but this may be something that’s outside your control. It’s important to disclose this information early to try to find a way to work with your mortgage provider around this schedule.

As with any mortgage, the size of your deposit can have a significant effect. The bigger the deposit, the easier it will likely be to secure a mortgage as a pensioner.

Term length
Some lenders may look to offer shorter term lengths to pensioners, increasing the monthly payments. This is likely an area that can be negotiated to find something that works for all parties.

Exploring Mortgage Options for Pensioners

Pensioners have many of the same avenues as everyone else when it comes to mortgages, and a couple of others specifically suited to them

Traditional mortgage
Pensioners can apply for traditional mortgages in the same way that anyone else can. Once the applicant meets the required criteria and can make the payments, this is an option for them. This may be difficult using just your pension income, however.

A retirement interest-only (RIO) mortgage allows you to borrow a tax-free lump sum and only becomes available once you reach the age of 50. With this mortgage, you’ll only be required to pay off the interest each month. The sum borrowed only becomes payable when the homeowner passes away or enters into long-term care.

Overcoming Challenges and Securing a Mortgage

Considering that some lenders may be slightly averse to lending to pensioners, it’s important to put yourself in as strong a position as possible to increase your chances of your application being accepted. One way to do this is to ensure that your credit score is as high as possible. Here are some practical ways you might be able to improve your credit score:

Limit your credit applications
Too many applications for new lines of credit might indicate that you’re struggling for cash and is a red flag to many lenders

Maintain a strong payment history
Ensure that any existing payments you have are paid on time and in full. Missed payments will significantly decrease your credit score.

Monitor your credit regularly
Obtain regular credit reports to ensure that nothing has brought your score down. If something appears off, you should be able to get in touch to question it and correct it if needed.

Consider consolidating existing debts
Seek help from a financial adviser to figure out if this option could be beneficial for you. It could drastically simplify your monthly payments, making it less likely that anything gets missed.

Final Considerations and Next Steps

Lenders are becoming more and more open to pensioners applying for mortgages, and there are plenty of options available to allow pensioners to secure one. The key thing is that you go into the process as informed as you can be. Read as much as you can to understand the options available to you, and get in touch with a financial adviser to fill in any knowledge gaps that you may have.

Make use of our wealth of resources, or simply get in touch to talk directly with one of our experts. The market for mortgages as a pensioner is constantly changing, so keeping up to date on what’s happening has never been more important.

Connect with The Openwork Partnership

Being well-informed is one of the best ways to give yourself a chance of securing a mortgage as a pensioner who works for you and is suited to your needs. At The Openwork Partnership, our team of dedicated advisers are all highly skilled at providing tailored guidance and support no matter what stage you’re at in your financial journey.

To get in touch with one of our experts, you can use our adviser search page. All you have to do is set the distance parameter to 10 miles and you can see who your local adviser is. From there it’s as simple as getting in touch to arrange a consultation, and we take care of the rest to give you the best service and support possible when it comes to your finances.


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