10 Jan How Does Your Age Affect Your Mortgage?
Securing a mortgage isn’t easy no matter how old you are, but a number of recent cases have led to claims that banks in the UK have been guilty of ‘ageism’, discriminating against older borrowers with unreasonable repayment options.
But is this justified? Are the banks correct to be warier of lending to older borrowers? We’ve taken a look at exactly how your age affects your mortgage application, and just how important a factor it is.
As with any mortgage, older borrowers have to be able to prove to their lender that they are financially stable and will be able to pay their monthly repayments.
But in general, lenders are reluctant to grant mortgages that are likely to run into a person’s retirement.
And now Halifax and Nationwide, two of the country’s biggest lenders determine the point of retirement as the state pension age, even if you intend to work past this age.
One the one hand, while older borrowers are likely to have significant assets and home equity, which is a positive, they are also likely to be on a fixed income which is lower than what they previously earned, which may be a problem for lenders.
A lot of lenders also require a mortgage to be paid off by the time you are 75, so this may mean you have to take out a shorter term deal.
How much of a problem is it?
Having pointed out the problems that an older borrow might face, just how much of an obstacle is it?
Of course this all comes down to the lenders, and your own personal circumstances, although we spoke to Andy Craddock from Mortgage Force Worcester who suggested that age might not as big of a barrier as you might think.
He said: “While age may provide you with a couple of issues when applying for a mortgage, lenders certainly shouldn’t be using it as a primary means of deciding whether to approve your mortgage or not.”
“Of course while there may be certain obstacles, each case should be taken on an individual basis, and decided solely on your ability to repay.
“We recommend getting in touch with a mortgage broker to assess your options and make sure you find the best deal.”
What can you do?
So if you’re over-50 and trying to apply for a mortgage, what can you do to increase your chances of being approved?
Obviously the main thing is showing that you can afford your repayments, especially if you are already retired.
To prove you can still make your repayments, you’ll need to provide some form of proof of income such as pensions and insurance policies.
As with any mortgage application, a good credit score is a big factor, so make sure you use a free credit checker such as Noddle to make sure you’re in good health.
If you do find yourself struggling, you might find it easier to downsize to a more affordable property.
Using a mortgage broker to check the whole market is a good idea too as some lenders may be more open to approving an older borrower.
While age does provide its own challenges when applying for a mortgage, it should by no means be used as a reason to deny you approval, and as long as you take time to assess your options and your own financial situation you should still be able to find a solution that works for you.