In recent weeks the maximum age for borrowers looking for a mortgage has been in the news with 2 of the largest high street lenders both offering products aimed at older customers.
So what does this mean for borrowers and how does the age of the borrower impact on their ability to get a mortgage?
The evolution of mortgage age limits
Historically, the maximum age was restricted by the fact that your mortgage term was set so that your loan was repaid before, or on, your state retirement age, 65 for a man and 60 for a woman. The lenders rationale behind this was simple, the lack of affordability of mortgage repayments once the borrowers were no longer in work and living on pensionable income.
There was also a cultural element in that retirement was very much seen as a time of enjoying the fruits of years of employment and so for many the thought of taking on considerable debt at that stage of their life was not a welcome one, hence no demand or pressure on the market to increase age limits.
Changing demographics over the last 20 years however have seen a gradual increase in maximum age limits as the population has lived and worked for longer and state pension ages have not necessarily meant the end of full time employment. Additionally, house price pressure has increased the average age of first time buyers considerably, creating a demand for longer loan terms in order for them to be able to afford the repayments and clear the debt.
As always, maximum age limits and attaching restrictions vary depending on the lender but typically you can obtain a mortgage up to age 70 or even 75 fairly easily.
The journey upwards for borrowers
In this latest move the Halifax and Nationwide have both announced increases to their maximum age limits over the past month. The Halifax were the first, with an increase in their maximum age limit at outset to 80 instead of 75 and a maximum age at maturity of the loan of 85.
The Nationwide has also increased its limit, from 75 to 85, from July onwards on its standard mortgage range subject to a maximum Loan to Value (LTV) of 60% and loan of £150,000.
These announcements are very much aimed at meeting the demand of older borrowers for lending well beyond the current age limits either to enable them to move home later in life or to release equity from their existing property.
It is likely that other lenders will follow suit over the months to come giving a wider range of options for borrowers.
As with all mortgage products different lenders will have different criteria and so it is worth speaking to an independent mortgage broker to fully understand the different options available and locate the right product for your circumstances.
Other lenders offer higher maximum age limits and may offer more flexible criteria than the examples given.
Other age limits to be aware of
In addition to this new wave of mortgage products there are some other circumstances in which your age doesn’t have to prevent you from obtaining a mortgage.
- If you are borrowing on a joint or multiple basis then a few lenders can work off the youngest borrower’s age although there is criteria to be aware of in terms of income levels of the younger borrower. It may be worth therefore taking out a joint mortgage with a younger sibling or family member if age is a potential barrier to lending.
- If you pay into a pension and can therefore demonstrate affordability into retirement there are some lenders that will offer higher age limits (depending on potential pension income). It can therefore be worth contributing to a pension scheme as it will aid overall age lending limits. You do however need to take into consideration that pension contributions will be included when assessing expenditure and affordability by some lenders so it is important to get further advice on the best way forward.
- Buy to let mortgages offered by some lenders have less age restrictions as they are assessed on different criteria. Whilst a tightening of lending criteria for buy to let properties is being proposed there are still options to borrow until age 110 or even higher if certain criteria is met.
Help and Advice
If you are an older borrower interested in taking out a mortgage either on your residential property or a buy to let investment and want information about the most suitable product for your circumstances give our friendly team a call for some free, unbiased advice on 01275 370360 or 0117 9070818Tags: Mortgage Loans and Age Restrictions
This post was written by Marcus Robinson