Borrowing options when you're aged 40+
As the average age for first-time buyers increases, more and more mortgage applicants are becoming concerned about upper age limits. While age may be a factor in your mortgage application, it is by no means a barrier to buying a home. Instead, applicants aged 40 and over may have to be aware that term length on their mortgage will be considered and monthly payments could increase.
Being a first-time buyer over 40 shouldn't be a problem. Many lenders factor in your age at the end of the mortgage term, rather than the beginning. This is because mortgages are predominantly awarded based on your income, which is usually based on a salary. If you retire while you are still paying off a mortgage, you will need to prove that your post retirement income is sufficient to keep up with your mortgage payments.
As a result, your mortgage term will likely be shorter, capping at a maximum of 70 to 85 years. However, if you cannot prove that your post-retirement income will cover your mortgage payments, this may be reduced to the national retirement age.
If you are a first-time buyer over 40, you may be excluded from some savings options, such as a Lifetime ISA but there will be plenty of other savings options to help you towards your deposit goal. Check out the regular savings accounts here.
If you are planning on taking out a mortgage at 40 or older, your maximum term will depend on your personal circumstances. For example, you may have equity from a previous home, which will increase your deposit and your chances of getting another mortgage. Alternatively, you may have another source of income besides your pension, which could go towards your mortgage payments.
While 35-year mortgages are commonplace for younger people, your chances of securing a mortgage will be sufficiently increased if you apply for a 15 or 20-year term. Mortgage lenders are more likely to award you a mortgage if your term finishes before your retirement. You can apply for a longer-term mortgage which takes you into retirement age, but you will have to provide sufficient evidence that your income can cover repayments after age 66.
Many of the factors that will improve your chances of getting a mortgage are equally applicable to younger applicants. For example:
- Work on improving your credit score to the best it can be by making sure that you pay bills on time and demonstrate good use of credit. You can also dispute any inaccuracies on your credit report if you notice that there’s something that you don’t agree with on there.
- Boosting your deposit: a larger deposit will increase your Loan-to-Value (LTV) ratio, which will look equally appealing to mortgage lenders. Many applicants over 40 may have spent years building up investments in property or by other means, which can be used for a deposit on a home.
- Research how much you can afford: you will need to have a clear plan of how much you need to afford your mortgage payments. This will include understanding the “hidden” costs such as surveys, on top of your initial deposit. Older buyers may have to present a clear payment plan to mortgage lenders if the mortgage is going to continue into their retirement.
A joint mortgage is also an option that you could consider if you are currently buying alone. For example, if you have children, buying a house with a child that is grown up could be an option or, buying with another family member such as a sibling. The other person you are buying with will have to prove that he or she can pay the mortgage alone if you retire or your income becomes insufficient.
Expert advisers at Mortgage Advice Bureau look at more than 90 different lenders to present a large range of options to you.
Whether you're a first-time buyer or still have a mortgage on your existing property there are mortgage options available if you are over 40.
Remortgaging is an attractive option for those looking to get a better mortgage deal, reduce monthly payments or raise capital for other needs.
You may consider a remortgage to release equity to pay for the deposit on a second home or investment property, or another large expense. A remortgage may also suit your current circumstances better, or help you fix your repayments for a set period of time. You should be wary of penalties before remortgaging a property, as these can sometimes be more than the benefit of the cost savings of remortgaging your home. Read our guide called remortgaging explained for more information on remortgaging.
A lifetime mortgage is a way of unlocking the value of your home after you’ve paid off your residential mortgage and own the home outright.
A lifetime mortgage is an option for over 55s and can remove the need to make repayments. Instead, you’ll pay off the interest only when your home is sold, upon death or another life event such as going into care. Rates can be higher, and the interest accrued could reduce the overall value of your estate, so it’s an option that customers should consider carefully.
You may also consider a lifetime mortgage if you want to give your children/next of kin an early inheritance, or want to settle a residential mortgage. It may also be an option if you’re likely to incur a big expense, for example a holiday or home improvements. Experts can help you decide if a Lifetime Mortgage is the right choice for you.
If you're aged 40+ and looking for a mortgage, Mortgage Advice Bureau will search thousands of deals so you don't have to. Answer some mortgage related questions and an adviser will give you a call to discuss your options.
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You should regularly review any savings you have. See our full range of savings accounts, compare interest rates and find the right product for your goals. To open an account, call your local branch and speak to an adviser who can book an appointment for you. If you'd prefer to open an account online, take a look at the accounts that our friends over at Beehive Money currently have.
