Am I too old to get a mortgage?
If you’re an older borrower you may wonder how easy you might find it to get a mortgage, especially if you’re a pensioner, or approaching retirement age.
Many older people think they’re too old to be accepted for a mortgage, but this isn’t necessarily the case. While some lenders impose a maximum age for a mortgage, with the right advice, a specialist mortgage broker may be able to find a mortgage which would work, no matter what your age.
Although there are mortgage schemes available specifically aimed at pensioners such as equity release, with mortgage arrangements like lifetime mortgages and retirement interest-only mortgages, this article discusses standard mortgage options for retired people, which can be either repayment plans or interest-only.
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How does age impact mortgage eligibility?
Being an older borrower can make you less eligible for a mortgage in the eyes of some lenders, but it’s important to remember that not all mortgage providers have age limits, and with the right advice, it’s still possible to secure favorable rates and flexible deals if you’re in or approaching retirement.
Why are older borrowers seen as high risk?
One reason why older people are typically seen as higher risk when it comes to getting a mortgage is that after retirement, you no longer have a regular salary coming in. Your income is likely to decrease, which makes it more difficult to assess whether you will be able to keep up with mortgage repayments.
As well as decreased and potentially unpredictable income, older borrowers can often be less less healthy and, because of their mature age, less likely to survive the full term of a 25 year mortgage. This all adds up to older borrowers generally being viewed as more of a risk for mortgage lenders. To help protect this risk, many lenders impose a maximum mortgage age limit for all older borrowers.
What are the main factors affecting mortgage eligibility if you’re retired?
There are several factors which affect eligibility for anyone getting a mortgage but the three which matter most for older borrowers are affordability, the term length and the loan to value or LTV. We explain each one in more detail below…
As with any standard mortgage, one of the most important factors for all mortgage lenders is your affordability.
If you’re not yet retired but plan to be in 10 years, say, for example, you’re 45 and plan to enter retirement age 55, some lenders may consider your mortgage application based on your current income from employment and limit the mortgage term accordingly.
As a retiree, you will need to be able to prove that your pension income can comfortably cover your repayments, on top of all your other outgoings. This will typically work out the same as that of a standard mortgage, with most lenders allowing a loan of 3 – 4x your annual income, and some potentially up to 5x – 6x.
If you’re applying for an interest-only mortgage, some lenders may consider a figure that exceeds this sum. If you’re using a secured loan to release cash, in the right circumstances, a few lenders may be happy to exceed up to 10x your income.
Contact us today for more information on secured loans or any other affordability queries.
The term length
Since some mortgage providers won’t lend to anyone over a certain age, being in your retirement years could limit your options when it comes to term lengths.
Some lenders have an age limit so if, for example, the provider has an age limit of 75 on a standard residential mortgage and you’re 60, you might be limited to a restricted term. If this were the case, you’d likely end up with high monthly repayments.
However, while some lenders will restrict the term to prevent a mortgage from running into your retirement years, there are providers who have no problem offering mortgage products that will not be paid off until after you retire.
Whether you qualify for these deals will depend on a number of factors, including:
- Your expected retirement date
- The current value of your pension pot
- Your forecast retirement income
Loan to Value (LTV)
LTV is the balance between the amount of the mortgage and the value of the property. The higher the deposit you can pay, the lower the LTV. This is the measure all lenders will use to decide the mortgage interest rate they will offer you.
How much deposit you have is a key consideration for all mortgage providers. For retired people on a standard mortgage plan this is no exception.
For repayment mortgages, most lenders are happy to approve with 80%+ LTV, which would require a 20% deposit. This LTV will give you more options so you’re likely to end up with the best interest rates. Some lenders will consider you with 85% LTV, and a handful may accept 95% LTV (5% deposit). This is all based on the lender’s affordability and subject other eligibility checks.
For standard interest-only plans, the minimum LTV is usually around 15%. For older applicants it tends to be higher, at around 25% LTV minimum. An interest-only agreement is also usually based on the sale of the property acting as the repayment vehicle.
Unlike a retirement interest-only mortgage, these plans will have a fixed end date by which the capital would need to be repaid.
If you’d like to talk to an expert to find out what sort of mortgage deal you might be able to get based on your age and circumstances, make an enquiry for a free, no obligation chat with one of the whole-of-market experts we work with.
What is the maximum age for a mortgage?
While the above factors will play a significant role on eligibility, different providers tend to have a set age limit on the oldest age you can get a mortgage, regardless of your other circumstances.
Generally, the older you are the fewer lenders will be willing to lend to you due to the associated risk.
The following table illustrates the likelihood of being approved for a mortgage as a pensioner, broken down by age.
Table of maximum age limits for mortgages
|Age of borrower applying for mortgage||Likelihood of acceptance||Lender considerations|
|Getting a mortgage age 50||High||Lots of providers are happy to lend to borrowers up to the age of 70, when many impose an age restriction mortgage cap. Provided you meet the other eligibility criteria, you may be able to borrow on a fixed term of up to 30 years|
|Getting a mortgage age 55||High|
|Getting a mortgage age 60||High|
|Getting a mortgage age 65||High|
|Getting a mortgage age 70||Fair|
|Getting a mortgage age 75||Moderate||While many limit borrowing at age 70, some will lend up to age 75 and a handful up to 80 years old if you meet all their criteria|
|Getting a mortgage age 80||Moderate|
|Getting a mortgage age 85||Low||Contrary to belief, it is possible to get a standard mortgage over the age of 85, and a few lenders have no age limit. While you will be more limited in choice of lenders, rates should still be competitive across those that do consider you. Other factors that will count in your favour is affordability, having a clean bill of health, clean credit, low LTV, and a shorter mortgage term.|
|Getting a mortgage age 90||Low|
|Getting a mortgage age 95||Low|
|Getting a mortgage with no age limit||Low|
Find out what kind of mortgage deal you might be able to get by talking to one of the expert mortgage brokers we work with. As whole-of-market brokers they have access to specialist lenders you won’t find on the high street. Make an enquiry and we’ll match you with a broker with the right experience to help.
Other factors impacting getting a mortgage if you’re retired
Having established the ways it is possible to get a mortgage at an older age, there are some factors which may make things more complicated, although some specialist lenders may still offer you a deal.
As is the case with all mortgages, every lender is different when it comes to what they will or won’t accept in terms of bad credit.
The majority may decline if an instance of adverse has occurred recently, or if it’s a particularly severe issue.
Others are happy to consider a wider range of issues, from late payments, to IVAs to bankruptcy – it all depends on the lender and your other circumstances.
However, bad credit can be more of an issue when borrowing later in life, especially if you are well past retirement. This is because there are already fewer lenders willing to lend to older applicants due to the risk they pose, meaning even fewer will be accepting of more serious instances of adverse credit on your file.
For more information, on how to get a mortgage with bad credit visit our section to see how different forms of adverse credit can affect your eligibility.
Since there are a smaller number of lenders offering later life mortgages, it stands to reason that rates are likely to be higher due to lack of competition. The rates you might get will depend on what rates are on offer at the time of your application.
If, however, you’re seeking a standard mortgage rather than a specific product for pensioners or older people, rates should be as competitive as they would be with any application. Speaking to a whole-of-market broker will help ensure you get the very best rates on the market.
Lenders tend to be more cautious when it comes to non-standard constructions because they are seen as higher risk, and therefore harder to sell when the term comes to an end.
As we’ve mentioned above, not all lenders think the same way and a whole-of-market mortgage broker will know of specialist lenders who are happy to accept certain types of non-standard property.
Visit our non-standard property page for more information on this or talk to one of the expert brokers we work with.
Speak to a retirement mortgage expert today
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