You may think that getting a mortgage in later life is a challenge, but it can be done if you have realistic expectations and obtain good advice. In fact, it may be far easier than you think.
We’re living longer these days. Over the last few decades, life expectancy has increased, partly due to advances in modern medicine. Worldwide, there are around 901 million people over the age of 60, with that number projected to reach 1.4 billion by 2030. The Office for national Statistics (ONS) has predicted that in 50 years’ time, there will be an additional 8.6 million people aged 65 and over.
So we’re living longer, and it seems we’re also living life on our own terms when it comes to relationships. According to the Office for National Statistics, some 42 per cent of marriages ended in divorce in 2019. People seem unafraid to pick up and start again if they’re unhappy.
Starting afresh with a new partner
If you’re someone who has recently decided to start afresh, and you now want to buy a place on your own, or with a new partner, you may well be wondering if you can get a mortgage, especially if you’re upwards of middle age. The good news is that times have changed.
It’s fortunate that many banks and building societies have adapted to us living longer and starting afresh in later life, which means that it’s now possible for older people to get a mortgage. ‘There really is so much later life lending,’ says MBA’s Managing Director Monica Bradley. ‘When I started out in this business, mortgage terms were usually 25 years and you always finished a mortgage by the time you were 65. Now there are many opportunities for people to borrow in later life and there are various options.’
‘Lenders have made great strides in accommodating older borrowers,’ agrees MBA’s Senior Mortgage Adviser Phil Leivesley. ‘Most lenders are happy to accept that you might now retire later and, providing it is feasible that you could maintain your specific job role, they will be happy to lend until age 70, and in some cases, age 75.’
Maximum age limits for applying for a mortgage
There is no official maximum age limit on applying for a mortgage, but most lenders impose their own limits. They normally impose a maximum age of 65 to 80 for taking out a mortgage. The mortgage term would normally need to end between the ages of 70 and 85.
This means that, if you are taking out a mortgage when you’re older, the term of the mortgage will need to be shorter and may be limited by your age. For instance, if you are 60, and want a mortgage paid off by the time you reach 70, you will need a ten-year term. This will make the monthly mortgage payments higher than if you were to take out a 15, 20- or 25-year mortgage, but there are other options. Depending on your personal situation, you might for example, be able to take out an interest only mortgage for ten years so that you only pay off the interest on the mortgage, then take out an equity release scheme at the end of the mortgage term to enable you to stay in your home. If you have a reasonably high value home in a desirable area, this may well be possible.
Mortgage options in your 50s
If you are in your 50s then you are likely to have a reasonable amount of choice over your mortgage options and may still be able to apply for a 25-year term. Of course it will help if your income has peaked and you have a good salary, as well as a decent deposit.
If you plan to retire when you are 65-70, you will also need to show that your pension and investment income can adequately meet your mortgage payments. A lender will need to be confident that you would be able to continue to pay off your mortgage after you have retired. They may ask about your expected retirement age, current pension pot and retirement income. ‘Having a reasonable pension will certainly help,’ says Phil Leivesley. ‘If you’re looking to borrow past the age where it might be reasonably expected that you will retire, a lender is likely to base their full affordability calculation upon your projected pension income. If this wouldn’t be considered sufficient to sustain the mortgage, then you could find that the mortgage term could be capped.’
We strongly recommend that you seek advice from a reputable mortgage broker who can advise you on the best options to suit you. Feel free to get in touch with a member of our friendly team.