Can you get a Bridging Loan if you're Retired?

Just because you've retired doesn't mean you don't have financing needs. Actually, now you have more time on your hands, you might finally be getting around to getting started with some of those larger jobs you've put off. The banks aren't too keen to lend on retirement income. However, there may be an alternative...a bridging loan. So, can you get a bridging loan if you're retired? 

In this insight, we answer the question, explaining what you need to be aware of, how to increase your chances of acceptance, and how to find an adviser to get the ball rolling for you.

Key Takeaways

• Retirees can indeed obtain bridging loans, and the strength of their application depends on factors like their exit strategy.
• Retirees seeking bridging loans should consider their income and affordability, loan-to-value ratio, exit strategy, creditworthiness, property valuation, and the associated interest rates and fees.
• To improve the chances of approval, retirees should assess their financial situation, have a clear exit strategy, maintain good credit, and consider working with experienced mortgage brokers.
• Some lenders do not have a maximum age limit for bridging loans, and eligibility is assessed based on individual circumstances and repayment methods.

Can you get a Bridging Loan if you're Retired?

Yes, you can get a bridging loan if you're retired. The strength of your application will depend on your exit strategy. A bridging loan may be a suitable alternative to a mortgage if you have means to repay the loan other than your income. e.g the sale of a house.

Bridging loans are often used by retired people who need short-term finance to help them with their retirement plans and other expenses. However bridging loans can also be used for many other reasons, such as property developments, downsizing, and cash-flow resolution.

As a retiree, there are some important factors to consider:

Income and Affordability

Lenders will assess your ability to repay the loan. If you're retired, your income may come from various sources such as a pension, investments, or rental income. Lenders will evaluate your income to ensure you can meet the repayments.

Loan-to-Value (LTV) Ratio

Lenders often have a maximum LTV ratio, which is the percentage of the property's value that they are willing to lend. If you have a substantial amount of equity in your existing property, it may be easier to secure a bridging loan.

Exit Strategy

Lenders will want to know how you plan to repay the bridging loan when it matures. Common exit strategies include selling your existing property, refinancing with a traditional mortgage, or using other funds.

Creditworthiness

Your credit history and credit score will also play a role in the lender's decision. A good credit history can improve your chances of approval.

Property Valuation

Bridging loans do not always require a property to be involved. But, if there is, the lender will typically require a valuation of the properties involved to determine the loan amount.

Interest Rates and Fees

Bridging loans often come with higher interest rates and fees compared to traditional mortgages. Make sure you understand the cost structure before proceeding.

How To Increase Your Chances Of Getting A Bridging Loan If You're Retired?

Increasing your chances of acceptance for a bridging loan when you're retired involves careful planning, preparation, and addressing the concerns of lenders. Here are some steps to improve your chances of getting approved:

Assess Your Financial Situation:

• Gather detailed information about your retirement income, including pensions, investments, and other sources of funds.
• Calculate your monthly and annual income to demonstrate your ability to make interest payments or cover the loan's costs.

Have a Clear Exit Strategy:

• Develop a well-thought-out plan for repaying the bridging loan. This might involve selling your existing property, refinancing with a traditional mortgage, or using other assets.
• Provide evidence of your chosen exit strategy, including a timeline and any agreements in place.

Maintain Good Credit:

• Check your credit report for accuracy and address any discrepancies or issues.
• Make sure your credit history is in good standing by paying bills on time and managing your existing debts responsibly.

Work with Experienced Brokers:

• Seek out lenders with experience in providing bridging loans to retirees or older individuals.
• A mortgage broker who specialises in this area can help connect you with lenders who understand your unique financial situation.

Bridging Loan Exit Strategies For Retirees

Having a well-documented and viable exit strategy is crucial. This might include plans to sell an existing property, secure a traditional mortgage, or access funds from another source to repay the bridging loan.

Some examples of clear and viable exit strategies for a bridging loan:

Sale of Existing Property:

You plan to sell your current home within a specified timeframe, and you have a signed sales agreement in place. The proceeds from the sale will be used to repay the bridging loan.

Traditional Mortgage:

You intend to secure a traditional mortgage on the new property you're purchasing with the bridging loan. You have pre-approval or a conditional mortgage offer from a lender, and the mortgage funds will be used to repay the bridging loan.

Accessing Investment Funds

You have investments, such as stocks, bonds, or a retirement account, that you can liquidate to repay the bridging loan once your existing property is sold or when the investments mature.

Downsizing

You plan to downsize your living arrangements by purchasing a smaller or less expensive property. The surplus funds from the sale of your current home will be used to repay the bridging loan, and the downsized property may require no further financing.

Rental Income

If you own rental properties, you can use the rental income generated from these properties to cover the interest payments on the bridging loan until you sell your current home or secure other financing.

Accessing Other Assets

You have valuable assets, such as a valuable art collection, antiques, or a valuable vehicle, that you can sell to repay the bridging loan. This could be especially relevant if you have valuable assets that are not directly tied to your real estate holdings.

Combination of Methods

Your exit strategy may involve a combination of the above methods. For example, you might initially use investment funds to cover the interest payments while you work on securing a traditional mortgage for the long-term repayment.

What is the Maximum Age for a Bridging Loan?

For some lenders, there is no maximum age when looking for a bridging loan. The loans are individually underwritten and take into account your repayment methods as well as individual circumstances. For that reason, a bridging loan is a great alternative to a mortgage for short-term funding. 

Can an 80-year old get a bridging loan?

Yes, it is possible for an 80 year old to get a bridging loan as age is not such an important factor when applying. Your means of repayment (exit strategy) will be considered more important when assessing your application.

Can You Get A Bridging Loan With Pension Income?

Unlike traditional loans, bridging loans rely less on your income as a determining factor for approval. This is because the repayment method for bridging loans typically doesn't involve monthly payments, making your income less critical in the application process.

Bridging Loans for Retirees

Bridging loans are versatile and individually assessed, making them a potentially great option for retirees facing specific financial needs or property-related transitions. However, bridging loans are not suitable for everyone, and retirees should carefully evaluate whether they are the right option for their circumstances. If a bridging loan doesn't align with their financial plan or needs, another option to consider is equity release. 

To give yourself the best chance of acceptance for a bridging loan, it's a good idea to speak to a specialist bridging loan adviser. Sunny Avenue specialises in helping people find the best adviser for their circumstances. To start the conversation around your bridging loan options, complete our fact find and we will put you in contact with the best adviser for you, right away.