Ever wondered if and when you are too old for a mortgage?
There was a time when the aim of those over 55 was to be completely mortgage free but with improvements in life expectancy it means that people are living longer and reaching older ages.
The world’s population is ageing at such a rate that the over 60s now make up over 10%, and by 2050 this is likely to rise to over 20%. So what does this mean for older home buyers trying to secure a mortgage.
Many banks and building societies are adapting to account for this and, as a result, it is now possible for older buyers to get a mortgage.
In the past, banks required customers to prove they could, in theory, afford a more expensive repayment mortgage where you pay back some of the capital as well as interest each month.
For many borrowers this was impossible because banks only allowed them a mortgage term up to their 65th or 70th birthday. As the repayments due were spread over such a short period, borrowers would have faced monthly bills for thousands of pounds, which they could not afford.
Under the new Financial Conduct Authority rules, customers may need to show only that they can meet interest-only repayments.
Retirement before mortgage
If you retire before you have finished paying off the mortgage, you will not have a regular salary any more. Your income will usually go down, meaning lenders will be unsure if you will still be able to afford the mortgage repayments. This means that offering you a mortgage is riskier as you get older. Lenders have to follow the Mortgage Market Review (MMR) rules, which mean they have to make sure you can keep up with repayments over the full term of the mortgage.
Maximum age for mortgage?
There is no maximum age for applying for a mortgage. However, most lenders have their own age limits. When you take out the mortgage there is usually a maximum age of 65 to 80. When the mortgage term ends there is usually a maximum age of 70 to 85.
This means that even if you are below the maximum age for a mortgage, its term could be limited by how old you are e.g. If you are 60 and want a mortgage that must be paid off before you reach 70, its term could be no more than 10 years. You have a better chance of being accepted if you have a strong credit history if your income is high enough to easily cover the mortgage repayments.
Talk to us at The Mortgage Hub to find out more about the best mortgage for your age and circumstances.
The Mortgage Hub is an independent mortgage advisor serving the greater Glasgow area. Whether you are planning to buy your very first home and need the right first time buyer mortgage, or are looking to re-mortgage due to a house move or to growing family – we understand your journey is so much more than a financial process, it’s a journey to achieve your dreams, improve your lifestyle and achieve your true potential.