Please remember that the below information is intended purely for reference only and should not be viewed as any kind of personal, financial or mortgage advice in Nottingham.
Right off the bat, the answer to this question is yes, it may be possible for you to get a mortgage over the age of 40, though this is entirely dependent on the mortgage situation.
According to an old survey that was undertaken on mortgage brokers by the Nottingham Building Society, a large portion, nearly half of those surveyed, said that they had experienced a rise in turned down mortgage applications from customers who were in their 40’s.
When speaking with customers directly who were between the ages of 45 & 54 who had been declined during the last two years (at that point in time), once again this was factored down to their age.
In this article we will try to provide an explanation as to why we believe home buyers are experiencing this, and the positive steps you could take if you would like to take out a mortgage at an older age.
To get a better understanding as to the position these mortgage applicants are in, it’s key to take a look at previous years, way back to before even the days of computerised credit scoring and increased industry regulation.
If you took a trip to your local building society for a mortgage, it is incredibly likely that you will have been interviewed by the building societies branch manager or one of their mortgage advisors in Nottingham.
They would individually make an assessment of your personal information, including how well you were able to conduct your current account, before deciding whether or not to approve your mortgage application.
If you were one of the lucky ones to be approved, then you would be given details on how much earners in similar positions to you, were able to borrow. This would have been given as a multiple of your gross annual salary.
As an example of this, if you were earning around £20,000 per annum and the mortgage lender’s income multiple was 3.5x, then you would be granted a mortgage of around £70,000.
What this method of income multiplier wasn’t factoring in, was your age. As such, it didn’t matter how old you were, whether or you were 30, 40 or 50, you would generally be able to borrow the same amount of money.
At face value, this is exactly how it might seem, however, if two applicants were both set to retire at the age of 65, the you might find one applicant with a term upwards of 35 years, whilst the other may only have around 15 years to pay back their mortgage, leading to higher monthly payments.
Looking at the previously used example of a £70,000 (capital and interest) mortgage and use that as an example, using a national interest rate of say, 5%:
So in this example, we have two virtually identical earners with the same amount of mortgage debt, but applicant two’s monthly payments are much higher that their younger counterpart.
If interest rates were to suddenly increase, then there would be an increased risk of arrears occurring for the second applicant. At the end of the day, risk is what it all comes down to.
Therefore, modern mortgage calculators will now factor in the maximum length you could take a mortgage term for (in other words, how old you are), as well as your income and your spending habits.
Some time ago, the BBC contacted our very own “Moneyman” Malcolm Davidson for a comment on a Nottingham Building Society study. He said that it was not so much that older customers are being turned down, but that they are not able to borrow as much as they would like.
Of course, the ironic part of all of this, is that we are in a constant cycle of being reminded that we will have to work later and later, by a government who keeps raising the retirement age, prolonging the time it will take for us to qualify for our state pension.
It’s unfortunate that the banks are not taking this into account when they look at granting customers a mortgage. Below we look at this in a little more detail.
First of all, there are many different industries that include manual labour, wherein you likely would not have the physical ability to continue working past your seventies, maybe even beyond that.
Furthermore, mortgage lenders are pretty closely monitored by the regulator in regards to repossessions and arrears cases, as it makes them look really bad if they occur. Taking a property into possession is usually very expensive and can attract bad press for mortgage lenders.
In terms of mortgages for much older mortgage applicants, they certainly don’t want to be at the point where they have to kick a pensioner out of their home, simply because they can no longer afford their mortgage payments.
The good news with this is that mortgage lenders have started to consider granting mortgages to applicants that may go past the standard retirement age, providing you can show that you are able to prove your affordability post-retirement.
In order to do this, you can typically provide your mortgage lender with a letter from your pension provider that would project your future income. The problem in this regard, is that most people with a pension will have a reduced income at retirement age.
This means when looking at your affordability, a mortgage lender would need you to prove that you are able to afford your mortgage even with a reduced income at a later point in your life.
In practice, this tends not to work very often, unless you are only looking to take out a smaller mortgage, which would likely mean you don’t need to stretch a mortgage past the point of retiring.
You may remember that back in 2011, they scrapped the default retirement age and now your employer cannot make you retire anymore, if that is not something you want to do.
As such whilst there will be some mortgage lenders who use the state retirement age as the general target for when people should have paid off their mortgage, it is becoming much more commonplace for them to allow customers to self-declare when it is they are planning to retire.
There will be a plausibility check when doing this though, so if you had a highly physical job such as a firefighter, and you were declaring an intended retirement age of 72, they likely would not see this as being an actual possibility.
There was a case in the past where one of our mortgage advisors in Nottingham had worked on a case, wherein a mortgage lender was actually willing to do a 9-year mortgage for a 66-year old accountant of whom had declared they wanted to retire at the age of 75.
That of course is extraordinary circumstances and is not a guarantee for everyone, though it shows that it can in fact be possible. In terms of what you may be able to do to better your chances, you need to show how you are going to afford your mortgage later in life.
Consumer protections and regulations are there so that consumers can be protected and careful mortgage lending can be encouraged. If you need your mortgage term to run past the age people would typically retire, you need to show how you are going to be able to afford your mortgage, with proof.
As you head into later life, there are also plenty of other avenues you may be able to take to protect you and your home, such as equity release in Nottingham via a lifetime mortgage, or an alternative such as a retirement interest only or a term interest only.
A dedicated and qualified later life mortgage advisor in Nottingham will be able to review your circumstances and begin discussions with you and your family, if you are nearing the qualifying ages for these types of mortgage and would like to proceed, or even look at alternatives.
If you happen to be a first time buyer in Nottingham, or are looking to move home in Nottingham, please do not hesitate to get in touch with us, or book your free mortgage appointment online, today, and speak with a trusted member of our mortgage advice team.
To understand the features and risks of equity release in Nottingham, lifetime mortgages and later life lending, ask for a personalised illustration. Our typical advice fee is up to £1,495 only payable on completion.
A lifetime mortgage in Nottingham may impact the value of your estate and it could affect your entitlement to current and future means tested benefits. The loan plus accrued interest will repayable upon death or moving into long term care.
Last edited 22/09/2022