Can you Secure a Mortgage Over the Age of 50?James Trafford
Are you over the age of 50 and was thinking of taking out a mortgage? There are various reasons why someone over 50 may be looking at taking out a mortgage, such as needing to move to a new location, remortgaging, or splitting up with their spouse and going through a divorce.
While it is, of course, possible to secure a mortgage at this stage in someone’s life, they will face more stringent lending criteria and, moreover, will be restricted in what kind of deal they can get. Lenders typically don’t have an age limit for when you can take out a mortgage, but they do have an age limit for when you must have the loan repaid by, usually between the ages of 70 and 85. Many seem surprised when they learn of this fact.
The typical mortgage is for 25 years, which means that, as you get older, it will become increasingly difficult to secure a 25-year mortgage. So, if your lender has an end term cap of age 75, you cannot be over 50 in order to meet their criteria.
As you can imagine, the lender will want to ensure that you will be able to repay the loan in all circumstances, including if you were planning on retiring during the mortgage term, and this includes assessing whether your pension, etc., will be sufficient to cover it plus living expenses.
Finding a mortgage for over 50
If you’re over 50 and looking for a mortgage, you should be aware that your options may be limited. Smaller banks, building societies, and specialty lenders are among the sources of mortgages available through a mortgage broker. A broker’s specialised advice can assist you in evaluating the many options available.
In the event that you’re relocating, you’ll need a conveyancer to handle the legal side and paperwork. Comparing conveyancing quotes is a must if you want to receive the best possible value on your deal.
Criteria for lending to people over the age of 50
One thing that all mortgages have in common, irrespective of the circumstances of the applicants, is that the lender will run affordability checks to ensure you will be able to make the payments. If you are planning on retiring during the mortgage term, the lender will want to assess whether your pension and any other financial income can cover repayments. For example, if you have a buy-to-let property investment which brings in a monthly rental income, this will be considered.
In the same way as with a typical mortgage, you’ll have to provide proof that you’ll be able to make the payments on time. Additionally, the lender will look at your income history to see if it is consistent and reliable. A pension or investment income will be required if you’re retired, and lenders will want to see proof that it is a reliable source.
The credit score must be rated as good
Again, as with the traditional mortgage, the higher your credit rating score, the better chance you stand of securing a mortgage. Missing card payments or utility bill payments can adversely affect your credit score, as it will be financially associated with others who have a poor credit rating.
If you take out a mortgage over the age of 50, it will mean that you will usually have a shorter repayment period. Whereas a typical mortgage term will run for 25 years, as you age, you will have less time left to make all the repayments. Recall that there is a cut off age for when the term must end by most lenders that ranges between 70 and 85.
When applying for a mortgage, lenders will take into account how much of the loan will be repaid in your retirement years. If you have a 25-year term mortgage and are 10 years from retirement, your lender will use your retirement income to determine your affordability. Lenders, on the other hand, will pay more attention to your current income if you have a shorter loan payback time.
Improving your odds of securing a mortgage when over 50
The key to improving your chances of securing a mortgage over 50 is showing that you have a regular and reliable income to keep up with repayments. Some high-risk investments, for example, may be deemed unreliable. There are two other things that can help you:
Equity in your home
With equity in your home, you can decrease your loan-to-value ratio when remortgaging (LTV). Lenders will be more willing to lend to you if your LTV is lower.
Your lender will, of course, assess any income you have coming in from your employment or pension, but they will also take into consideration if you have substantial savings, which they will see as a safety cushion for you in the event your stream of income is affected. You should know that when there’s a lot of inflation, your savings will likely be taken into account because your purchasing power is going down.