Joint Mortgage With Retired Parent
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Joint Mortgage With Retired Parent
Paul Collinson explains how to get a joint mortgage with a retired parent.
Can I get a joint mortgage with a retired parent?
Yes, you can. Many lenders allow joint mortgages between family members, including retired parents. The key here is proving affordability and meeting the lender’s criteria. Your combined incomes, including pensions, can be used to boost the borrowing power.
What’s the oldest age a lender will accept for a joint mortgage?
Most lenders set an age by which the mortgage must be repaid. Typically it’s 70, but some lenders now go to 75 and a couple of mainstream lenders will potentially go to the age of 80.
Do pensions or retirement income count towards affordability?
Yes, they do. Lenders will consider state pensions, private pensions, investment income and even rental income, if you have that.
How does my parent’s age affect the maximum mortgage term?
The older the parent is, the shorter the term most lenders will allow. For example, with those that go to 80, if your parent is already 65, the lender might cap the term at 14 years from the next birthday.
Some lenders may allow longer terms if the younger applicant can afford the mortgage independently and doesn’t have to use the older person’s income.
Will my parent’s credit history affect our application?
Yes. All applicants are jointly and severally liable on a mortgage, so lenders will assess both credit profiles. Any poor credit history on the parent’s side could reduce your options or affect the interest rates you’re likely to get. Having said that, some lenders are more flexible if the adverse credit is historic or minor.
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Are there specialist lenders or products for older borrowers?
Yes, there are certain options like Joint Borrower Sole Proprietor mortgages or Family Assist mortgages.
Should we apply as joint tenants or tenants in common?
That just affects the ownership, not the mortgage itself. Joint tenants is the more common option, which is equal ownership. If one owner dies, the other automatically inherits.
With tenants in common the ownership is split, and you can choose the percentage of share each person has.
Are there inheritance tax issues to watch out for?
Probably, but as a mortgage broker, we’re not allowed to offer tax advice. You need to speak to a qualified tax advisor for that.
What happens to the mortgage if my parent has passed away?
If that happens, the mortgage responsibility would pass to you. The mortgage must continue to be paid, so lenders may reassess the affordability. Obviously, that could be an issue.
Life insurance and mortgage protection is strongly recommended – which is always the case on mortgages, but especially on this type.
How do I apply for a joint mortgage with a retired parent? What’s the process?
It’s the same as with other mortgages. You would initially come to us here and we’d assess the affordability and look at your income proof. We would get you an Agreement in Principle so you know exactly what you can borrow and what property values you can start looking at.
When you find something you like and have an offer accepted, we will search the market to obtain the most suitable deal for you. If you’re happy, we submit the full mortgage application and keep you updated. The lender underwrites it and sends a valuer around.
If they’re all happy with that, the mortgage offer will normally arrive within a couple of weeks.
The legal work is then completed – this can take a lot longer than the mortgage offer, but we will be there with you all the way through.
How can a mortgage broker help here? Anything you’d like to add?
I don’t think there’s anything else. But if anyone has any questions, just pick up the phone or contact us through our socials.
Key Takeaways:
- Joint mortgages with retired parents are possible, with lenders considering combined incomes, including pensions, for affordability.
- Most lenders have an age limit for mortgage repayment, typically 70-75, but some extend to 80. The parent’s age can shorten the maximum mortgage term.
- Pensions, retirement income, investment income, and rental income all count towards affordability.
- Both applicants’ credit histories are assessed, and poor credit from the parent can affect options or interest rates.
- Life insurance and mortgage protection are strongly recommended, especially for this type of mortgage, as the responsibility passes to the younger applicant if the parent passes away.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
For specialist tax advice, please refer to an accountant or tax specialist.
Useful Links
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- Agreement in Principle