Hundreds of thousands of homeowners expect to be repaying their mortgage well into retirement as the number of borrowers taking out mortgages in their 50s and beyond continues to rise.
Previously, getting a mortgage later in life was difficult, if not impossible, but the good news is it’s getting easier. In recognition that we’re living longer, more lenders are increasing their maximum age caps for mortgage lending, but if your repayments overlap with your retirement, proving your income can become a little more complicated. You can find out more about all the different mortgage options that may be available to you, and how they compare, in our articles Mortgages for over 50s: What you need to know and Mortgages for over 60s: what you need to know.
Here, we outline what proof of income your lender might ask for and how you can provide them with the information they need based on a variety of scenarios.
Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage. If you’re looking for expert mortgage advice, you can speak to an independent mortgage broker with Unbiased. Every advisor you find through Unbiased will be FCA-regulated, qualified and unconnected to product providers – so they can offer you truly unbiased advice.
What proof of income will lenders accept from older borrowers?
When you apply for a mortgage at any age, your lender will want to see proof of your income, so that they can be certain that you’ll be able to make the repayments throughout the mortgage term. They will usually have a list of types of proof they deem acceptable, such as recent payslips and bank statements, or two or three years of accounts if you’re self-employed. This list doesn’t change that much for borrowers in their 50s, 60s and beyond, but if you’re planning to retire during the mortgage term, your lender will ask you for evidence of how much income you expect to receive in retirement.
What counts as acceptable proof of income will vary from lender to lender, and when you fill out your mortgage application, you’ll be asked about both your income and your out-goings.
Generally, lenders will accept any of the following, as proof of income:
Employment proof of income
- Payslips from recent months – the length of proof your lender wants will vary. For example, Barclays asks for three months’ payslips if you’re paid monthly and five weeks if you’re paid weekly, while Nationwide wants three if you’re paid monthly, but eight if you’re paid weekly. Always check directly with your lender.
- Three months’ bank statements showing your salary being paid in.
- Your P60 or tax summary.
- Details of regular bonuses if relevant
Self-employment proof of income
Self-employed proof of income can be a little trickier, and lenders will often want to see a much longer history of your finances. You can prove your self-employment income through the following:
- Your recent HMRC tax year overviews – most lenders will want your evidence to cover at least the last two years.
- SA302 calculations provided by HMRC – this shows up to four years of your earnings and tax payments. You can get this by requesting it from HMRC, or your accountant may be able to provide this on your behalf.
- Trading accounts for the most recent tax year for limited companies.
Pension proof of income if you haven’t retired yet
If you’re planning to retire during the mortgage term, you’ll need to provide evidence to your lender that you’ll have enough income to cover your monthly repayments both before and after you retire. This means you’ll most likely need to provide the usual list of employment income we outline above and a current prediction of your retirement income. To prove this you should be able to use the following:
- Your private and/or company pension forecast statement – you can request this from your pension provider/s.
- Your State Pension forecast (this can be obtained from The Pension Service).
Pension proof of income if you’ve already retired
If you’ve already retired and you are either applying for a new mortgage or are remortgaging, your main source of income is likely to be your pension. Lenders will usually want to see the following documents if this is the case:
- A bank statement for the last full month that shows how much you receive each month from your pension.
- An annuity statement – if relevant.
- Your latest pension payslip.
- Your P60 – If you pay tax on your private pension, your pension provider will send you a yearly P60. If you don’t have one, contact your provider to request it.
- Your State Pension statement.
Of course, retirement looks different for everyone so you might also have some form of employment or self-employed income, for example, if you have a buy to let property or have a part-time job. If this is the case you’ll also need to provide supporting evidence to show how much income this provides you with.
One thing to bear in mind is that if you’ve just retired and haven’t yet started receiving your pension, you might have to wait until you’ve had at least three months of pension income before you submit your mortgage application.
Proof of other income
If you receive any other form of income, you’ll need to include details and provide evidence of it when you submit your mortgage application. Other forms of income might include:
- Benefit income, for which you’ll need your latest statement from the Department for Work and Pensions (DWP). This will outline the type of benefit you receive and the amount you are paid. If you receive Child Benefit, you’ll need your DWP Child Benefit Letter. You’ll also need to provide recent bank statements that show these payments going into your account.
- Child Maintenance income, for which you’ll need documentation of the arrangement in the form of a court order or other authorised arrangement body and bank statements showing that you regularly receive these payments.
Navigating the ins and outs of getting a mortgage or remortgaging can be confusing, so and it can be useful to get advice.
Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage. If you’re looking for expert mortgage advice, you can speak to an independent mortgage broker with Unbiased. Every advisor you find through Unbiased will be FCA-regulated, qualified and unconnected to product providers – so they can offer you truly unbiased advice.
How does proof of income change for retirement interest-only mortgages or equity release?
Retirement interest-only mortgages and equity release are both types of mortgage that are specifically designed for the over 55s.
For retirement interest-only (RIO) mortgages, the monthly repayments you’ll be making will be paying off the interest, which means they are lower than a standard mortgage. This means that the level of income you’ll need to prove that you have will also be less.
Lenders may still want to see evidence of your income and may ask for any of the documents outlined above, but you might not need to provide as long a history. Of course, things will vary from lender to lender, so always make sure you check directly with your lender what they require. You can read more about RIO mortgages in our article How retirement interest-only mortgages work.
If you’re taking out an equity release plan, such as a lifetime mortgage or home reversion plan, then you won’t actually need to prove your income as you won’t be making monthly payments.
However, if you decide to take out a lifetime mortgage, you might choose to make monthly repayments against the accumulating interest, in which case, your lender may want to see proof of your income to determine how much you can pay. You can read more about the different types of equity release in our article Equity release – what is it and how does it work?
Before taking out an equity release plan, you’ll need to seek professional financial advice.
You can find a local financial advisor on VouchedFor or Unbiased, or for more information, check out our guide on How to find the right financial advisor for you.
If you’re looking for somewhere to start, you can get expert advice from an independent equity release specialist with Unbiased. They’ll listen to your needs and talk you through your options, so you can decide if equity release is the right option for you.
You can learn more about the differences between lifetime mortgages and RIO mortgages in our guide What’s the difference between a lifetime mortgage and a retirement interest-only mortgage?
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