Am I too old to get a mortgage?
If you’re aged over 55 and worried that you might be too old to take out a new mortgage, fear not! Read on to learn more about why age can be important to lenders, the restrictions you might face, and the options available to you.
Too old? What do you mean too old?
You’re working 9 to 5, ferrying the kids to and from college and planning a trip of a lifetime when you retire. You don’t have time to be too old!
Well, as it happens, the chances are you’re not too old to get a mortgage – I recently secured a mortgage for an 82 year old! It is true, however, that things can get more challenging if you’re aged over 55, and looking for a mortgage.
Why is age even an issue?
Standard mortgages used to have a term of around 20-25 years though it’s becoming more common for these terms to be 30 or even 40 years. The term is usually designed to finish when the borrower retires (the state retirement age is currently 68). This means that a 43-year-old could take a 25-year term and still be within the “accepted” retirement age.
When you’re employed, lenders are reassured you have a regular income to cover the cost of mortgage repayments. So if you’re in retirement or edging close to retirement the risk to the lender appears higher. The increased chance of health concerns in older age can also present a risk to the lender if you’re unable to pay back the mortgage loan.
What are some of the restrictions you might encounter with a standard mortgage?
Here are some of the more common restrictions I’ve come across when working with clients aged over 55:
- Not being able to take out a new mortgage if you’re over a certain age. For some lenders this is 65, but for others it can be in your 80’s.
- Stipulating that you must pay off the mortgage by a certain age. For some lenders that age is 70 and for others it’s 85+
- You might find there are less regular interest-only mortgages available to you.
- Lenders will expect you to pay off your mortgage over a shorter term (e.g. 10 years rather than 20 years) which can result in higher monthly payments.
- Deposit requirements can be higher to make the affordability work.
Every lender is different though, so these restrictions won’t always apply. A mortgage broker will be able to find out exactly what restrictions apply to your circumstances.
Think less about your age and more about your circumstances
When clients ask me if they’re too old to get a mortgage, I’m quick to point out that it’s their circumstances rather than their age that matters most.
As an example – let’s say you’re 60 years of age, you work full-time so have a regular income. You have a lot of equity in your home and a good pension forecast. Chances are, you will be in a better position than someone in their 30s with a poor credit history and no deposit.
Remember that mortgage lenders care about managing their risk more than they care about your date of birth. They want confidence that they will get their loan back at the end of your mortgage term, so if you’re aged over 55 then they will naturally want more reassurances.
So here are some things to ponder if you’re over 55 and considering a mortgage:
- Do you earn an income? If so, is your income sufficient to cover mortgage repayments?
- If you work, when do you plan to retire?
- If you still work, do you have a pension plan and if so, how much do you expect to receive on retirement?
- What is your credit history?
- How much equity do you own in your current property or how much savings do you have to put towards a purchase?
Are there any benefits to taking out a mortgage when you’re over 55?
While you’re likely to come under more scrutiny than a borrower in their 30s, you do have a lot in your favour:
- If you’ve had a mortgage for most of your life then you will have a longer borrowing history which will be a reassurance to lenders.
- If you’ve accrued a good level of equity in your home over the years then the mortgage you require will likely be smaller.
- There are some specific mortgage options only available to those aged over 55. These include a Retirement Interest Only mortgage and Equity Release. Speaking to a qualified mortgage broker will help you understand all the options available to you and to weigh up the pros and cons based on your individual circumstances.
How can you increase your chances of getting a mortgage if you’re aged over 55?
Most of the same principles apply here to any mortgage customer, with a few exceptions:
- Make sure your finances are in good shape – take a look at our blog about bad credit which gives a comprehensive list of things you can do before applying for a mortgage.
- Ensure you have proof of income – either from employment or pension payments if relevant.
- Get familiar with your pension predictions. Even if you’re 10 years away from retiring, it will be helpful (and sometimes essential) to know what you can expect to earn from your pension when the time comes.
- Pay as much of your current mortgage off as possible so you have maximum equity in your existing property.
- Working with a mortgage broker can also help identify the most appropriate mortgage options for your circumstances.
It’s worth exploring all your options because a standard mortgage might not be right for you
Every client I work with, irrespective of their age, has their own unique set of circumstances, and different reasons for wanting to secure a mortgage. There tend to be even more motivations for securing a mortgage when you’re over 55 (e.g. releasing equity for retirement or family, downsizing, moving closer to family etc). So it pays to choose the mortgage product that best fits your needs.
If you want some help investigating your options, get in touch for a no-obligation chat.
How our team can help you find a mortgage if you’re aged over 55
We pride ourselves on making the world of mortgages more approachable.
We have more information about how we can support with over 55 mortgages on our website which you can take a look at here.
Clara Downton is also one of only 3 mortgage advisers in the Bishop’s Stortford area registered with the Equity Release Council.
Other blogs we’ve written about mortgages over 55 that you might like to read
Equity Release – https://downtonmortgages.co.uk/considering-equity-release-do-these-5-things/
Equity Release – https://downtonmortgages.co.uk/how-equity-release-can-help-you-ride-the-cost-of-living-crisis/
Equity Release (Lifetime mortgage) – https://downtonmortgages.co.uk/what-do-you-need-from-a-lifetime-mortgage/
Legal bits we need to tell you
The information contained within was correct at the time of publication but is subject to change (September 2024).
Please note for all mortgage products, terms and conditions apply. This information is a summary only. You will receive full documentation upon application which sets out the terms, conditions and limitations of lending provided.
YOU HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
A Lifetime Mortgage will reduce the value of your estate and may affect your entitlement to means-tested benefits and tax status. The impact of not servicing monthly interest payments on a Lifetime Mortgage is that the outstanding debt can grow rapidly, thus reducing the value of your estate.
For example, if the interest rate was 7% a year, a £50,000 loan would double to £100,000 after 10 years assuming no repayments are made.
This is an example for illustrative purposes only and personalised advice and recommendations should be sought from a qualified professional.
You are strongly advised to register a lasting power of attorney. This will allow your affairs to be managed by somebody else if your mental abilities significantly decline.