What is the Maximum Age for a Mortgage?
Obtaining a mortgage over the age of fifty can have unexpected pitfalls. From income requirements and age limits, it can be tricky to find an affordable mortgage if you are an older borrower. There are however plenty of options if you are an older borrower including mortgage products specifically designed for those over the age of 55.
This guide looks at mortgages for older borrowers and explains the differences between them. Let’s explore this further.
How Does Age Impact Mortgage Eligibility?
As you get older, a mortgage becomes more difficult to obtain. This is because traditional mortgage products have maximum ages which can restrict the term you have. For example, if a lender has a maximum age of 79, and you want to borrow at the age of 70, the maximum term on your product will be 9 years.
When compared to the standard 25-year term on a mortgage, having a 9-year term is considerably less in comparatively higher monthly payments. Making this more frustrating, most borrowers over the age of 70 will be relying on retirement income to repay mortgages and pensions tend to be limited income compared to salaries.
As you might have realised, although there are additional hurdles, providing you are within a lenders maximum age limit, you may be able to get a mortgage at an older age.
Other Factors that Affect Mortgage Eligibility
There are two factors that can impact older borrowers other than age limits. These are:
- Credit Score
When you borrow money for a traditional mortgage you will need to show the lender that you have income sufficient to repay the loan.
Normally income is demonstrated through a salary, but if you are retired you can use pension income for affordability. Because pension income is typically lower than salaried income, you might find it harder to meet the affordability calculation.
All borrowers looking to take a traditional mortgage will need to pass a credit assessment. This is something to be aware of when applying for a mortgage as your credit score could prohibit you from getting the product you want.
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Mortgages for Over 50s
Over fifties mortgages are designed to counter almost all (you will still need a credit check) the above-mentioned problems. Equity Release is a popular later-life mortgage option. It is only available to those aged 55 and over.
There are two types of Equity Release available in the UK: Lifetime Mortgages and Home Reversion Plans.
A Lifetime Mortgage allows you to free up cash tied up in your property by releasing the equity. There are no mandatory monthly payments, and the loan is repaid when you pass away or go into long term care.
Normally the loan is repaid by selling the property although when you pass away there may be other options available such as family members repaying the loan from their own funds or your estate.
Lifetime Mortgages are the most popular form of Equity Release in the UK as they tend to offer the best value for money.
Home Reversion Plans
Home Reversion Plans allow you to sell a portion of the equity you hold in your property up front to a Home Reversion Plan provider. Unlike Lifetime Mortgages, you will not need to repay interest on the mortgage as you are selling your equity up front.
Home Reversion Plans can be suitable if you wish to avoid the interest on a Lifetime Mortgage. The downside to a Home Reversion Plan is you will be offered much lower than market value for the percentage of the property that you sell to the provider.
As with a Lifetime Mortgage, you have the right to remain in the property until you pass away or go into long term care.
When is Equity Release not Available?
To get an Equity Release mortgage you will need to own a property already and hold substantial equity in the property (with no or little mortgage remaining). You will also need to be aged 55 or over to get an Equity Release product. Most Equity Release providers will require a credit score, so ensuring your credit score meets the minimum requirement for the lender is important.
However, equity release providers are typically more lenient towards credit scores than standard mortgage lenders. This is because monthly mortgage repayments are not mandatory with equity release products.
The Equity Release Council
If you are looking for an Equity Release product you will need specialist advice. There are a number of Equity Release brokers and providers that operate outside the remit of the Equity Release Council.
The Equity Release Council is a voluntary body that implements high standards across the Equity Release market. Boon Brokers is registered with the Equity Release Council and meets those high standards.
What Our Clients Have To Say
How to Improve Your Chances of Getting a Mortgage as an Older Borrower
The single best way to improve your chances of getting a mortgage over the age of fifty is to discuss your circumstances with a UK-based Whole of Market Mortgage, Insurance and Equity Release Broker.
A broker can look at your requirements and make a recommendation that suits your needs best as well as find you the best lender for your situation. Alongside your mortgage advice, a broker will be able to source you the best insurance product if a life insurance policy is suitable for protection purposes.
Boon Brokers is a UK-based Whole of Market Mortgage, Insurance and Equity Release Broker and proud member of the Equity Release Council. We offer fee-free, no obligation mortgage and insurance advice. Call us today to discover the options available to you.