Whether you’re retired, no longer working or are over 66 (official UK retirement age), you may be thinking about purchasing a buy-to-let property with a mortgage. But questions often arise over if it’s possible to get a mortgage during the later years of life or during early retirement. With that in mind, we’re looking at the current landscape and whether you can get a buy-to-let mortgage if you’re retired.
Can I borrow past retirement?
Until not long ago, mortgage providers were hesitant to extend mortgages that would leave borrowers in debt post-retirement.
Conventional wisdom still suggests that homeowners should aim to pay off their residential mortgages before exiting the workforce if possible. This is largely due to the expected decrease in income upon transitioning to a pension, which could make mortgage payments more challenging to manage.
Buy-to-let mortgages, however, typically present a different scenario: the loan repayments tend to cover the rent collected from tenants, rather than the borrower’s employment or pension income. Therefore, the borrower’s age should, theoretically, be less of a concern than it is with a residential mortgage.
What are the age limits for buy-to-let mortgages?
In reality, age remains a factor for some buy-to-let lenders as well. Just like residential mortgages, there are often age caps that prevent the mortgage from extending beyond a borrower’s 70th or 75th birthday, for instance.
Other lenders, however, offer more lenient age limits, up to 85 or even 90, so it’s beneficial to explore options and consult a mortgage broker for expert advice. At Molo, we don’t have an age cap on lending. Our decision making is based on the property you want to buy and its potential achievable rental income.
For instance, you would need to pass an affordability test which included interest cover ratio (ICR). This is a measure used to assess whether the rental income from the property is sufficient to cover the mortgage interest payments.
Let’s say the ICR requirement is 130% of the interest rate. If the mortgage interest is £500 per month, the rental income would need to be at least £650 per month to meet this requirement.
Learn more about buy-to-let mortgages with Molo
Subject to receiving all the relevant information and qualifying for an automated property assessment
Remortgage in 24 hours
Molo offers a range of buy-to-let remortgage deals starting from 80% LTV
How does remortgaging work for retirees?
Plenty of landlords enter retirement while still having a buy-to-let mortgage, during which time their initial term can expire. As a result, they’ll need to remortgage. The process is largely the same as getting a brand-new mortgage and is dependent on the lender’s criteria, although your eligibility will be defined by your circumstances when remortgaging.
Again, while Molo has a minimum age of 21, we don’t have a maximum limit on how old someone is when applying for a mortgage or remortgage. And that’s across all of our buy-to-let mortgages, including individual buy-to-let, houses of multiple occupation (HMO), holiday lets, multi-unit freehold blocks (MUFB) and portfolios.
Which factors affect buy-to-let mortgage applications for retirees?
Each lender has their own criteria, but a poor credit score can make getting a mortgage more challenging. Since buy-to-let mortgages are often interest-only, a bad credit history doesn’t automatically disqualify you from securing a mortgage, but it may play a role in terms of the rates and general deal you’re offered.
Different lenders also have varying comfort levels with high-value loans. Factors like your age, health and investment strategy may influence their willingness to lend a larger amount. If you can show a strong return in a short timeframe with a high rental income or provide a higher deposit, applying for a substantial mortgage isn’t out of the question.
Mortgages for non-standard properties can be more challenging to secure due to higher associated risks. For instance, investing in a timber-framed house or a thatched-roof rental property could be considered riskier. However, some lenders specialise in non-standard properties, which makes it possible to get a mortgage.
Is buy-to-let a good investment for retirees?
Buy-to-let properties can present both opportunities and challenges for retirees. On the positive side, they offer an additional income stream, which can be particularly beneficial when pension income is limited.
Rental income can be relatively stable and predictable, especially if the property is in a high-demand area. Additionally, property has historically appreciated in value over time, meaning there’s a chance you can increase the value of your investment.
There are also risks and responsibilities to consider, however. Property management can be time-consuming and may require a level of physical activity that could be challenging for some retirees.
There’s also the risk of property devaluation or periods without tenants. These are known as “void periods” and require the landlord to cover all costs. You need to factor this into your thinking when getting a buy-to-let mortgage, as you’ll be required to cover the mortgage payments even when the property is empty and doesn’t generate income.
Buy-to-let and second properties also come with additional tax implications, including capital gains tax if you sell the property for a profit. This is where you pay tax on the profit you’ve made since buying the property.
For example, if you bought a property for £350,000 and sold it for £500,000, you may be liable to pay capital gains tax on the £150,000 profit.
Final thoughts: retirement age
A buy-to-let investment can be a good move for retirees, whether you’re remortgaging your current property or investing in a new one. And thanks to relaxed rules over the last decade or so, it’s now easier for retirees to get a mortgage on a buy-to-let property.
Subject to receiving all the relevant information and qualifying for an automated property assessment
Remortgage in 24 hours
Molo offers a range of buy-to-let remortgage deals starting from 80% LTV
