When it comes to getting a mortgage, there are a few rules and regulations that you need to follow and different lenders have different criteria. Each lender’s criteria helps safe guard themselves from potential risks when lending money and also safe guards borrowers from taking on loans that they can’t realistically afford. In previous articles we have spoken about how lenders look at things like buyer’s income and outgoings to determine how much they can borrow. However, a major factor taken into account when determining mortgage affordability is the customer’s age. In this blog, we will explore a couple of pieces of age related mortgage criteria that could be useful for you or someone you know.
Am I Too Young To Get A Mortgage?
How old do you have to be to get a mortgage? In the past, it was commonplace for children to move out of their parents house and immediately buy their first starter home, get married, and have children. Unfortunately (or fortunately depending on how you look at it!) the ability for young people to purchase has been decreasing over time as house prices increase and the ability to save money for a deposit goes down significantly.
IdealHome reported in January 2022 that the average age of a first-time buyer in the UK has now increased to 31 years old. But, if you are lucky enough to be in a position to purchase a property before you are 31, the minimum age to apply for a mortgage with most lenders is 18. But, some lenders, such as buy-to-let lenders may insist that you are at least 21 years old before you can apply for a mortgage with them.
Am I Too Old To Get A Mortgage?
The answer to this is not too straight forward as it really depends on a few factors:
- How much mortgage are you looking to borrow?
- How long do you want the mortgage for?
- Are you still working?
- What type of mortgage are you applying for?
Most standard residential mortgage lenders will allow you to take a mortgage up until the age of 70, with some lenders going up to 75. Mortgage affordability is often determined by how long you can take a mortgage for. If you can take a mortgage for 30/40 years, your mortgage affordability will often be a lot higher than if you had a shorter mortgage term. On average, a 60 year old person taking a 10 year mortgage will be able to borrow a lot less than a 30 year old person taking a 40 year mortgage.
Having a shorter mortgage term may also mean that your mortgage payments per month will also be significantly more than if you took a longer mortgage so this will need to be something that you will have to consider.
If you are still employed and receiving an earned income, most lenders will take your mortgage term up until retirement age. However, if you are already retired and receiving a pension income, a lender may be able to take you past the age of 70 or 75 using your pension income alone.
Type Of Mortgages
The type of mortgage that you are applying for is also a major factor when considering age. As we’ve already said, a standard residential mortgage will normally allow you to borrow up until the age of 70 or 75. But, if you are purchasing or remortgaging a buy-to-let, this could change. A lot of lenders who offer buy-to-let mortgage may be willing to lend past the age of 70 or even past the age of 80 because the money you are earning from the rental income will cover the mortgage payments when you are elderly, so the risk of lending is a lot less than taking a standard mortgage.
There are two specialist types of mortgage designed for older borrowers. Retirement interest only mortgage and lifetime mortgages.
Lifetime mortgage are mortgages that some lenders offer that you have on a property until you die. You will pay the mortgage back per month like a normal mortgage. When you die, the mortgage must be repaid in full with interest. Normally this would be done by selling the home but your family will need to arrange a way of paying back the loan with the bank once you have passed away.
Retirement Interest Only Mortgage
A retirement interest only mortgage is similar in that it is available for older borrowers to take out until death but you will pay off just the interest per month rather than any capital. Your family will still need to pay back the mortgage loan in the event of your death, but because you have been paying the interest per month, there won’t be any interest to pay on top.
If you or anyone you know is interested in how long you can realistically take a mortgage for or are concerned about your age playing a factor, please give our advisors a call today to see how we can help.