Am I Too Old for a Mortgage?

The difficulties associated with securing a mortgage have been well documented, particularly for first-time buyers and those with negative equity or poor credit history. In terms of mortgage advice, older borrowers are rarely included in this group, yet in many cases age can be a major hurdle in securing a long term loan. 

Age Restrictions

The problem mortgage lenders have with older borrowers isn't so much their current age as it is their age at the end of the loan. For example, a 50-year old person will be 75 by the end of a 25 year term, 10 years past the age of retirement. As a result, most lenders include a legal clause that states a mortgage must be paid off prior to retirement, unless the borrower can provide evidence that they will have a sufficient retirement income. Some lenders such as Santander and Yorkshire Building Society allow mortgages to be paid off by the time the eldest borrower reaches 75, yet those that extend beyond retirement are more heavily scrutinised. Woolwich, on the other hand, has a limit of 70. HSBC institutes a limit of 65 on interest-only payments, but allows repayment up to 75. Leeds Building Society allows applicants to reach the age of 85, yet only if they possess a significant pension or savings from which to make payments. Despite these seemingly flexible limits, the likelihood remains high that most loans beyond the retirement threshold will be manually underwritten. 

First Time Buyers Over 40

For some individuals, the age restrictions are compounded by the fact that they are first-time buyers. While this may ostensibly be a rare occurrence, given the economic struggles society faces today more and more first-time buyers are over the age of 40. 

As these mortgages could end past the age of retirement, most of them will be closely examined by lenders. In most instances, however, these policies are not applicable to modern standards. Many first-time buyers over the age of 40 are choosing not to retire at age 65, particularly if they spent most of their early years paying off tuition debts and other fees. Better health and poor saving habits also result in pushing back the traditional retirement age. Consequently, standard actuarial measurements should not discourage an individual from applying, as lenders themselves are re-evaluating their age restrictions. 

Guarantor Mortgages

Another common group of applicants who might fall under the age restrictions are first-time buyers who depend on their parents to be guarantors. These loans, called guarantor mortgages, are becoming a popular vehicle for parents to assist their children within buying their first home. However, guarantors are subject to the age limitations instituted by the lender. Therefore many parents, particularly those who had children later in life, will be too old to assist them in this regard. 

What to Do as an Older Borrower

Anyone over the age of 40 looking to secure a loan should think carefully whenever they fill out an application. The obvious step would be to apply for a mortgage shorter than 25 years. Typically, lenders offer mortgages at a minimum of 5 years. Unfortunately, many individuals are not in a position to pay the higher monthly payments that are a consequence of shorter lending periods. In these instances, potential borrowers should discuss options with their mortgage broker to enhance their eligibility. Having a retirement pension or demonstrable savings history can sway a lender that an applicant is fiscally responsible. Working in an industry that can be performed past the age of 65 can buoy an individual's case. Furthermore, finding lenders who are sympathetic to easing age restrictions can also increase the chances of securing a mortgage.