There are many lenders who have strict criteria and maximum age limits when it comes to approving mortgages, however, there are specialist lenders who are happy to offer mortgage products to borrowers of any age.

There are many schemes that have been created with pensioners in mind, such as lifetime mortgages, equity releases and interest-only retirement mortgages. But there are also traditional mortgage products available for those considered old. Thankfully there are a number of specialist lenders out there willing to offer repayment and interest-only standard mortgage products to pensioners and retirees.

Eligibility For Older Borrowers

It’s not surprising that lenders will be less inclined to lend to people as they get older for the simple fact that they have less time to repay the loan. There are however specialist lenders, who can be accessed through specialist mortgage brokers, that have no upper limits when it comes to the age of prospective buyers. Not only are mortgage products available for this age demographic, but there are some great deals with competitive interest rates available for those looking to get a mortgage later in life.

Older borrowers, particularly pensioners, are typically considered higher risk primarily due to the fact that their regular income is usually lower than their younger counterparts and therefore lenders are more concerned with their ability to meet monthly mortgage payments. Meeting the affordability criteria can be more challenging as you get older and most lenders, especially in the current economic climate, are not willing to take the risk.

There are three main eligibility criteria that lenders look at when applications are made for standard mortgage products:

1. Affordability

This is probably the most important test that the lender will apply to your application. The affordability test will look at whether the borrower can realistically meet the monthly repayments for the property they wish to purchase.

For borrowers in their 40s and 50s, lenders may be quite stringent in their criteria and will be assessed on their current income and employment. Although still quite a way to go to retirement age, this age group will possibly be accepted for a mortgage with shorter repayment terms. 

For the older age group, retirees and pensioners, proving that they can meet the repayments with their pension income is paramount to being accepted. All monthly outgoings will be taken into account as with any age group applying for a mortgage. The majority of lenders will allow 3 to 4 times annual income, with some even going up as far as 5 to 6 times.

For those considering an interest-only mortgage, this figure could potentially be a lot higher with some, but not many, offering 10 times annual income, provided you are using a secured loan to release cash.

2. Mortgage Term Length

The term length of the home loan is an important consideration, particularly for older borrowers who have fewer options available to them in terms of the number of lenders willing to approve them for a mortgage.

The majority of lenders will have an upper age limit which will restrict the term of the loan. For example, if you are 60 years old and the lender has an age limit of 75 years, then you will probably be required to take the loan over a shorter period which will, in turn, result in higher monthly repayment rates. Borrowers will need to prove that they can afford the higher amount for the lender to feel confident enough to approve the mortgage.

It varies from lender to lender as to whether they will allow a mortgage to run into the borrower's retirement age. Some will allow it, whilst others will have more stringent rules regarding mortgages being paid off prior to retirement. It all boils down to individual lenders’ criteria and most importantly the affordability aspect.

Qualification criteria will depend on various factors including the amount of retirement income the borrower realistically can expect to receive on a monthly basis, the date at which they will officially retire and the amount of money that has accumulated in their pension scheme, if they have one.

3. LTV (Loan to Value)

The loan to value amount is very important when lenders are considering the approval of a mortgage for older borrowers. The LTV is the ratio of the mortgage against the value of the property that will be purchased. For example, an LTV of 60% means that the buyer pays a deposit of 40% of the property's full value and the lender will cover the remaining 60% with the home loan. 

The larger the deposit that older buyers have, the more likely they are to be accepted for a standard mortgage product. Many lenders will require a 20% deposit for a standard repayment mortgage with competitive interest rates. Others will accept as little as a 5% deposit but the interest rate will be understandably higher.

For interest-only mortgages, lenders will generally accept a 15% deposit but for older applicants, most require a minimum of 25% down payment. The property in this type of mortgage agreement is considered as the ‘repayment vehicle’, meaning that the ultimate sale of the house will repay the home loan in full. With a retirement interest-only mortgage there is no end date like there would be for a regular interest-only home loan.

4. Maximum Age Range

The maximum age range varies from lender to lender. The majority will approve applications from buyers up to the age of 70 as long as they meet all the eligibility criteria. For older applicants (75+) the choice of lender is significantly diminished and reduces even further for the over 80’s. However, this does not mean that this age group is completely excluded, as there are lenders, although only a few, that are happy to approve applications provided they meet all the criteria required by the lender.

Why Older Mortgage Applicants May Not Be Approved

There are a variety of reasons that older mortgage loan applicants may be rejected for a home loan:

• Bad Credit History – for all age groups this could present a problem when applying for finance, particularly for the older age demographic. A retired buyer is already considered to be high risk so lenders will be unlikely to approve when the applicant also has a bad credit history. There are, however, some specialist lenders who will consider these applicants.
• High-Interest Rates – as there are fewer lenders willing to lend to pensioners and retirees, interest rates are higher due to the lack of competition.
• The Type of Property – lenders will assess the type of property that the buyer wishes to purchase to ensure that it is not a non-standard construction which could potentially be difficult to sell at the end of the mortgage term.

It is commonly known that different banks have varying service expectations to release funds, however, in this guide, we will discuss the differences in the number of days those specific banks take to release mortgage funds.  We will also discuss the importance of timeliness when dealing with financial transactions and the consequences of a delay.

How long do specific banks take to pass on mortgage funds?

Each bank will have specific service targets that they aim for in order to provide a time frame to release funds, however, on the odd occasion, there may be a complication that extends this time period. According to research by Mortgageable, the current target time frames that banks aim to release mortgage funds are as follows:

It is important to note that interest is applicable for mortgages as soon as the funds are drawn from the lender and paid to the solicitor and therefore timing is extremely important. 

How are mortgage funds released?

Mortgage funds are released on the day the mortgage holder legally becomes the owner of the property, on the completion date of the mortgage. The typical process involves the elected solicitor drawing the mortgage funds from the lender ahead of completion, to ensure that cleared funds are available for the completion date.  Solicitors often allow extra time to ensure that the funds are received in time, perhaps requesting the funds from the mortgage provider three working days ahead of completion.

Once cleared funds are ready the solicitor will make the payment for the property to the seller’s solicitor and in return, receive the title deeds to complete the process. Each transaction will need to be actioned in a timely manner, allowing time for the funds to clear.  Often each transaction will involve moving a large sum of money between banks via a specific type of bank transfer called a CHAPS, which stands for the Clearing House Automated Payment System.  There are charges for using the CHAPS service, usually between £20 and £35 per transaction.  

How long can a solicitor hold mortgage funds?

The duration of time that a solicitor can acceptably hold mortgage funds will depend on the lender’s rules. If the drawn funds are not used, either in their entirety or partially, the solicitors must return the funds back to the mortgage lender.

What happens if mortgage funds are not released on the completion date?

There could be a significant impact on the property transaction in the scenario that mortgage funds are not released in time.  In this scenario the solicitor will likely already be liaising with the lender to understand the nature of the delay, however, it is recommended that the applicant should always keep in touch with all parties to ensure that any queries can be resolved as soon as possible.

Can mortgage funds be released before exchange?

It is not a common practice for lenders to release mortgage funds prior to the exchange date, other than giving a few days grace for funds to clear.  If there is a specific need for early funds to be released, the solicitor will be required to discuss the case with the lender. However if there is a requirement that the lender cannot meet, perhaps due to an unplanned change with the transaction, another type of finance may be required such as a Bridging loan.  It would be best to seek independent financial advice in such a scenario to find the most appropriate financial solution for personal circumstances. 

Can the standard release process be sped up?

Unfortunately, the process of releasing funds cannot be sped up as there are strict rules regarding the process from various parties. Examples of which can be found below:

• Legal checks required – The source of funds will need to be established and proven ahead of the transactions taking place in order to comply with anti-money laundering legislation which came into UK law in 2017.  The objective of the legislation is to stop criminals using professional services to launder money within the UK and requires solicitors to ensure that the potential property owners have proven their identity, address and source of funds.
  

• The administration time – As discussed within this article, the lender will require administration time to process the request of releasing funds.  In addition to this, further time is required to enable the withdrawn funds to clear, following being moved between banks.

However, mortgage applicants can assist the process to run as smoothly as possible by being organised with paperwork, signing documents and being prompt to answer any queries. In addition, applicants should ensure that the monies required for the deposit, to pay the solicitor and any Stamp Duty if required are in an accessible place and have cleared in plenty of time. 

Summary 

In this post, we have explored the process involved with releasing mortgage funds when purchasing property, including the typical duration of time this takes for specific banks and the importance of clearing funds.We have also briefly covered the checks required to allow solicitors to meet anti-money laundering legislation. Should you have any queries regarding obtaining a mortgage, the mortgage process, or anti-money laundering legislation, please do get in touch with our friendly team for further advice.