How does age affect mortgages?

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Why is it harder to get a mortgage as an older person?

It can be tricky to get a mortgage as an older borrower, but it’s not impossible. Mortgage lenders tend to view older people as higher risk, especially if you’re retired. This is because you probably don’t have a regular salary coming in. It’s also likely you’ll be earning less, which could affect your ability to keep up with the mortgage repayments.

Mortgages are very long loans, so there’s a risk that an older borrower might not live to the end of a 25/30 year mortgage term. Because of this, some lenders have a maximum age for people they’ll lend to.

What factors affect mortgages as an older person?

There’s a few things that affect how you’re viewed as an older mortgage applicant:

Affordability

As with any mortgage, whether or not you can afford the repayments is one of the most important factors for lenders when assessing your application. Lenders have strict affordability checks in place to make sure you won’t struggle financially. 

If you’re not retired but plan to be in the next few years, some lenders will consider you based on your current income and adjust the length of the mortgage term to suit. If you’re already retired, you’ll need to prove that your pension will cover the mortgage repayments and other outgoings. 

Length of your mortgage term

Because some mortgage lenders won’t lend to people over a certain age, you might find you have limited options when it comes to the length of your mortgage term. You’ll probably have a shorter term, meaning your monthly payments will be higher. 

However, there are some lenders who’ll offer you a mortgage into your retirement years. Whether you’ll qualify will depend on a few things:

  • When you plan to retire

  • How much you currently have in your pension pot

  • Your expected retirement income

Loan-to-value

Loan-to-value (LTV) is the balance between the mortgage amount and the value of your property. For example, if you put down a 15% deposit for a house, you’d need a mortgage for the other 85% - making your LTV 85%. It’s a term you’ll hear a lot when dealing with mortgage brokers and lenders, as this is how your interest rate will be decided. The lower your LTV, the better your interest rate. 

Your deposit is a really important factor when finding a mortgage. The more money you can put down up front, the more options you’ll have. Most lenders will ask you to put down a deposit of at least 10%. 

It can be really confusing trying to figure out your options, so it’s best to work with an expert mortgage broker who can help you find the best deal for your needs. We can help with that! Make an enquiry to get matched to a friendly advisor.

Can I get a mortgage if I’m older and have bad credit?

It’s possible! But it’ll be tricky. As with any mortgage, it all depends on which lender you go to. They all have different lending criteria for applicants with bad credit. It also depends on what type of credit issues you’ve had and how recent they were. For example, a few missed phone payments will be looked on more favourably than a recent IVA.

Borrowing in later life can already make things more difficult, and adding bad credit on top can be tough. You’ll probably have a much smaller choice of lenders, but it’s not impossible.

With any credit issues, it’s best to face them head-on. Finding out where you stand is a great place to start. We recommend using checkmyfile to view your full credit history. It’s free with a 30-day trial, and gives you an in-depth look at your report and where to improve.

If your situation isn’t straightforward, it’s best to work with a specialist mortgage broker. A broker lives and breathes mortgages, so they’ll know which lenders are likely to accept you, and how to make your application look good. Make an enquiry to get matched to the perfect mortgage broker for your situation.

Are mortgage interest rates affected if I’m older?

It’s possible that you’ll be asked to pay higher interest rates as an older borrower. Lenders need to balance out the risk of giving you a big loan in your later years. However, if you’re opting for a standard mortgage rather than one specific for pensioners, you could still find a competitive rate. 

If you want the best deal, it’s best to work with a mortgage broker. Get in touch to get matched to the right broker for your situation.

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