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I Took Out a Mortgage When I Retired: A Case Study

By: Emma Eilbeck BA (hons) - Updated: 9 Jan 2013 | comments*Discuss
Retirement Mortgage Lender Property

When it comes to lending to people in retirement, mortgage lenders tend to be a bit more nervous. There is the extra worry that you have no steady income, or at least not one from a job - and that you might fall behind with your repayments.

If you do want to take out a mortgage in retirement you will have to prove to the mortgage lender that you are a good investment and you can pay back the debt.

Are You A Good Risk?

Frank was 62 years old and had retired at the age of 60, he was lucky enough to have already paid off the mortgage on his existing property at the age of 50. He was looking to move closer to his family who all lived in the South of England and houses there were a lot more expensive there than they were in Yorkshire where he currently lived.

“I had a lovely two-bedroom semi-detached house in Yorkshire which I adored. However I adored my family more and decided that I wanted to pack up and spend my retirement closer to them," explains Frank.

“After looking at a few houses similar to my current house, I realised I would need to take out a small mortgage of around £15,000. I could have downsized but I wanted to have the two bedrooms so if any of my friends came to visit me in retirement they would have a place to stay," says Frank.

Applying For A Mortgage

Frank visited a mortgage broker to ask what his options were and whether a lender would consider him a good investment.

“I had some savings, but did not want to use these as this was my emergency retirement fund. However the mortgage broker told me that without a regular income coming in my options were limited," he says.

“In my previous life I had worked in the IT industry and I still knew a lot of my old contacts quite well. I decided that if I did a bit of consulting work on the side I would be able to make a few hundred pounds a month, which would cover a mortgage payment," says Frank.

Making Sacrifices

“I knew I had retired to enjoy life and I had to think long and hard about going back to work in order to fund my retirement home,” says Frank. After selling his house Frank decided to rent for while close to where his family lived. He embarked on his work as a consultant and worked around two days a week.

“I soon found that I enjoyed being back in the swing of things regarding work and it also gave me the opportunity to get to know the new area I was living in.

“The lender specified that they needed at least three months of pay checks in order to even consider me for a mortgage. I was able to show them this after a few months and they could see my income was enough to meet their repayments," says Frank.

Frank’s family also agreed to act as a guarantor for his mortgage, so that if he was to fall ill or not be able to pay the mortgage they would be able to step in.

“The mortgage I took out wasn’t for a vast amount and I didn’t feel like I was under pressure financially. Being close to my family helped reassure me that I had made the right decision and I was able to enjoy my retirement,” Says Frank.

Taking out a mortgage in retirement is not ideal, but as long as you are entering into it knowing the risks involved you should be safe.

Mortgage lenders will generally not tend to offer you a huge mortgage in retirement because of your lack of income, this doesn’t mean you should rule it out though as it can be a safe way to raise some additional money to buy a property in retirement.

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