I am 56 and my wife is 54 – and finally, after saving. we are ready to buy a home.
However, mortgage brokers say there is nothing available because of our age. Is that right?
We have a total income of £85,000. In my role I can undertake consulting up to the age of 70.
We will both have income from our respective private pensions in retirement – but, ideally, we would pay off the mortgage before we both retire. R.P, via email.
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David Hollingworth replies: The regulation that followed the credit crunch and ensuing financial crisis sought to improve lending standards generally, but later life lending was certainly one of those key areas that the Mortgage Market Review focused on.
In an ideal world it makes sense to plan for any mortgage to be repaid by the time we retire.
Post retirement income will typically be lower, so not having a mortgage to contend with will make monthly budgeting easier.
However, lenders tended to react by tightening their criteria around lending to older borrowers and where they may not have necessarily had specific age limits in place, many began to put in place a maximum age at the end of the mortgage term.
That didn’t prevent the lender from considering a mortgage that ran beyond anticipated retirement age, but many put a maximum of 70 or 75 at the end of the mortgage.
Although that still allowed for mortgages to be granted to older borrowers it limited the options, especially for those approaching the top end of the age cap.
Over time mortgage lenders have sought to apply some more flexibility on the maximum age that they can consider, recognising that some older homeowners want the ability to use a standard mortgage and were well equipped to manage a monthly payment.
That’s helped improve the range of options and although some lenders will still limit the maximum age to 75 at the end of the term, others are now able to consider lending to 80 or 85.
Others may go even further or have no maximum limit at all and some have developed products specifically aimed at borrowers over 55.
For example, Marsden Building Society offers specific products aimed at borrowers over 55 and can offer a term that extends beyond the maximum age that would apply to its standard products.
A new type of product was also developed to offer an option that didn’t require there to be a specified mortgage term at all.
The Retirement Interest Only (RIO) mortgage offers borrowers the chance to borrow on an interest only basis and the mortgage is only repayable on sale of the property, on death or on a move into long term care.
Maximum age may not be the only limiting factor. Although lenders will have varying approaches to age, they will all need to be sure that the mortgage is affordable throughout the term.
Therefore, they will also want to understand that the level of income will be adequate. There may also be more limitations on the proportion of the purchase price that they will lend, which could require a bigger deposit.
That income can include demonstrable pension income if it’s required to borrow beyond retirement. The shorter the term that the mortgage is structured over, the higher the monthly payments will be which could affect affordability.
It may therefore be important to evidence the likely income not just now but throughout the mortgage term, so gather up as much documentation on expected pension income as possible.
After saving up, the couple are ready to buy their own property, but mortgage brokers have said there is nothing available for them due to their age
That’s true for the RIO mortgage as well, as there will be a monthly payment required to meet the interest.
Given these are aimed at older borrowers, lenders will often also consider if one were to die and how that would affect the income, to make sure that the mortgage should remain affordable. That can limit their availability for some borrowers.
On the face of it, you have a good current level of income, so it would make sense to consider in more detail what is limiting your options.
It may be your age but there could well be some solutions available if affordability can be evidenced throughout the mortgage term.
Some of the building societies and specialist lenders are often strong in mortgage options for older borrowers.
Leeds Building Society can consider lending up to 85 at the end of the term and offers RIO mortgages and smaller societies can also have a flexible approach.
Specialists such as Livemore and Hodge also offer a wider range of options for older borrowers than many mainstream lenders.
