It’s not as common any more to buy a house in your 20s and pay if off by retirement. With an aging population and more of us working for longer, you may very well reach the age of 50 with a large chunk of your mortgage still to pay off. However, while you may have to jump through a few more hoops, it’s not impossible to find a deal. There are lots of mortgages for over 50-year olds, and here we explain how to get one and what you need to know.
You can get a mortgage if you’re aged over 50, and in some cases a lot older.
While it might be a little tougher than when you were in your 20s or 30s, it’s not impossible and more deals are coming onto the market all the time.
In fact, because a growing number of people are reaching their 50s with mortgages to repay and the days when everyone had paid off their mortgage by this age are long gone, there are options to be had.
The first thing to do is calculate how much you can afford and a free mortgage calculator is a good place to start. If you’re remortgaging an existing property, it’s worth doing some research into current rates to compare the costs with applying for a new mortgage.
Rising house prices mean it takes a lot longer for younger people to buy their first homes. Instead of buying one when you were in your early 20s, the increasing cost of rent and living means it is not as easy to save for a deposit, and the amount needed has risen significantly.
As a result of this, those currently in their 20s and 30s are expected to be living and working - and paying off their mortgages - well into their 50s, and lenders are reacting to this by offering more products to older borrowers.
It is the decision of a mortgage lender who it gives a loan to. It will set an age limit of both the age you can take a mortgage out and the age you aim to pay it back by.
While upper limits are dependent on individual lenders, on the whole they tend to follow this model:
Taking out a mortgage: Age 65 to 70.
Paying off a mortgage: Age 70 to 90 (just one bank, Aldermore, has an age limit of 99)
As you get older, there are more restrictions on mortgages. Usually younger borrowers will take out a mortgage over a 25-year term but if you’re aged over 50 this is likely to be significantly shorter, making the monthly payments higher.
If you already own your home, it might be possible to remortgage instead of taking out a brand-new deal.
You’ll still need to meet all the eligibility requirements and there are no guarantees you’ll be accepted but the terms could be more favourable if you’re sticking with your current lender.
It does matter how old you are when applying for a mortgage. This is because a lender wants to be sure you will be able to pay the mortgage back to them before you die.
As morbid as it sounds, lenders base their loans on expecting them to be paid back, so if a lender feels you’re statistically likely to pass away before paying off your mortgage in full, you may not be approved.
Lenders also need to be sure you can keep up with repayments on a mortgage, even when your income drops and you retire. Therefore, the terms of a mortgage if taken out when you are older might be stricter than for younger people.
However, there is a lot more choice than there used to be, and the options are opening up all the time as lenders react to our changing lifestyles and the fact we’re all living and working a lot longer.
The good news is that there are lots of ways you can boost your chances of being approved for a mortgage, whatever your age. These include the following.
A solid plan to pay the loan back
Evidence of savings or another income
Avoiding taking out or applying for any other loans around the time you’re applying for your mortgage
Making sure all your bills and credit card repayments are paid on time
Cutting down on unnecessary spending
If you can show a lender you have the funds to make repayments and pay off a mortgage, there’s no reason why you can’t take one out when you have already retired.
There are a number of things a lender will look at including:
How much you can afford - our mortgage calculator can give you an idea
If you own your current home outright and can release equity from it
Your credit score
Your income and where this is coming from if you have retired
When you apply for a mortgage, a lender will need to see documents to show you can repay it.
These include proof your income will be enough to make your mortgage repayments, even if you have already retired. Lenders will also look at your everyday spending to see if you could still afford to make these if your circumstances changed, such as if you had to start paying for your healthcare.
While each lender will have its own requirements, the list below is a general guide to what you might need to hand over.
Pension statements - if you’re close to retirement you’ll need to show how much you will be earning when you stop working
Regular spending patterns
Evidence of a separate income if you don’t have a private pension, such as savings
Any debts you may be paying off
What kind of mortgage should I get?
Those aged over 50 still have the same options as younger borrowers. These include the following:
Each month you pay back an amount off your overall loan and the interest rate of the loan. As you pay it off, the overall amount decreases until you’ve cleared the entire loan.
These mortgages tend to have lower monthly payments, because you are only paying the interest off the mortgage each month and after a fixed period you’ll then make a lump-sum payment. While they are still available, you’ll need to be able to prove you can make the interest and final payment within the timeframe of your mortgage in order to be accepted.
If you take a fixed rate mortgage you will pay the same amount for the whole period of the mortgage deal. This means if interest rates rise or fall during this time, your payments won’t change. A variable rate mortgage on the other hand is linked to the Bank of England interest rate, so the amount you’re paying may change during the mortgage deal.
It is possible in some circumstances to take your existing mortgage with you to a new home. This is known as porting and can be an easy way of moving because you don’t need to get a new mortgage.
However, there are no guarantees your provider will allow you to do this. You usually have to reapply for your existing mortgage as if you were applying for the first time.
If your circumstances have changed, for example, or your provider has changed its lending criteria your provider may reject your application.
If your mortgage application is rejected, or you can’t find anything that meets your circumstances, there may be other options.
Not all providers are the same and it might be the case that another will accept you. Lenders have different criteria for mortgages and while one may not be willing to lend to those aged 50 - 60, for example, another could.
Speaking to a specialist broker could also be your best option for finding a suitable mortgage.
There are other options, although they may cost you more in the long run. You could look into taking out a lifetime mortgage. This is a type of equity release loan and the money is secured against your home and is usually only available for those aged 55 and over.
Interest is charged on the amount you have borrowed and this can be repaid or added to the loan. When you die the home is sold and the loan is paid off, with anything left going to your beneficiaries.
This type of mortgage can be a way of freeing up money in your home and the money released is tax free.
However, they aren’t suitable for everyone and having one will impact the value of your estate which also affects your right to benefits if they are means tested. Therefore it’s important to consider all the options before taking one out.
The most important thing to do whether you’re remortgaging or applying for a first mortgage is to do your research and find the best deal possible.