Can You Manage a Mortgage on Pension?

When it comes to retirement planning one of the most common pieces of advice is to pay off your mortgage as quickly as possible. No mortgage = less financial stress. But what if you want to buy a new home after you retire? Will you be able to get a mortgage and will you be able to manage the payments?

What counts against you?

To be brutally honest, your age makes you very high-risk. Lenders can reasonably expect people in their 20s, 30s, and 40s to live long enough to repay their mortgages. The chances of you living long enough to repay a mortgage for 20 – 25 years start to look a little slim when you hit your 60s.

Your income is also, obviously a factor. As a pensioner, your income is fixed and, unless you’ve been very, very good at planning for retirement, it won’t be as high as it was when you were working, which means that you’ll probably have to settle for a smaller loan than you would if you were 20 years younger.

What’s in your favor?

You’re probably not looking for a three-bedroom, two-bathroom, and double-garage house. Two beds, one bath, one garage, and a modest garden will do you fine; something like a cottage. Small houses are cheaper than big houses, which is great on a fixed income.

Unless you’ve been renting all your life, you probably have a home that you can sell which will help significantly with a deposit. The ideal is for the sale of your old house to cover the cost of your new home. But if you’re moving to a very popular retirement area (Florida, to haul out a tired cliché) or want to buy in a retirement village then you might come up a little short. The shortfall shouldn’t be overwhelming, however, which means that your mortgage should be manageable.

If you have been renting and you don’t have a house to sell then you should (in an ideal world) have a comfortable nest egg (in addition to your pension) that can serve as a deposit. Deposits are very important.

You’ll have built up a good credit history and a solid financial record, which will stand you in good stead in any loan application process.

It’s illegal to discriminate against anyone based on age. Yep, credit providers are not actually allowed to deny you a loan because you happen to be over 60 years old.

So, can you manage a mortgage on your pension?

If you’ve planned properly for your retirement then you should be able to manage a modest mortgage – provided you consider all sundry expenses, like maintenance, insurance, rates, and taxes. It helps even more if you have an existing property to sell. It’s also a good idea to find a lender that specializes in mortgages for over 60s. Before you make any final decisions, however, you should talk to your financial advisor.