Can I get a mortgage at my age?

Mortgage guidance for your forties, ﬁies and

beyond. Mortgage guidance for your forties, ﬁies

and beyond. Mortgage guidance for your forties,

ﬁies and beyond. Mortgage guidance for your for-

ties, ﬁies and beyond. Mortgage guidance for your

forties, ﬁies and beyond. Mortgage guidance for

your forties, ﬁies and beyond. Mortgage guidance

for your forties, ﬁies and beyond. Mortgage guid-

ance for your forties, ﬁies and beyond. Mortgage

guidance for your forties, ﬁies and beyond. Mort-

gage guidance for your forties, ﬁies and beyond.

Mortgage guidance for your forties, ﬁies and

beyond. Mortgage guidance for your forties, ﬁies

and beyond. Mortgage guidance for your forties,

ﬁies and beyond. Mortgage guidance for your for-

ties, ﬁies and beyond. Mortgage guidance for your

forties, ﬁies and beyond. Mortgage guidance for

your forties, ﬁies and beyond. Mortgage guidance

for your forties, ﬁies and beyond. Mortgage guid-

ance for your forties, ﬁies and beyond. Mortgage

guidance for your forties, ﬁies and beyond. Mort-

gage guidance for your forties, ﬁies and beyond.

Mortgage guidance for your forties, ﬁies and

beyond. Mortgage guidance for your forties, ﬁies

and beyond. Mortgage guidance for your forties,

ﬁies and beyond. Mortgage guidance for your for-

ties, ﬁies and beyond.

Can I get

a mortgage

at my age?

Consumer information guide

It is not ‘impossible’ for older borrowers to get mortgage

ﬁnance, but you could be forgiven for thinking so. This

leaﬂet looks to dispel the myths with facts and provide

sources for additional information, whether you are

looking to borrow from a building society or other

mainstream lenders.

This guide aims to provide clear information about

borrowing into and in retirement, the things your lender

may look at when you apply, and some top tips to improve

your chances of getting a mortgage.

Taking out a mortgage is clearly a signiﬁcant ﬁnancial

commitment. Before starting you should be comfortable

that you will be able to aord the repayments for

the whole of the mortgage term. Your home may

be repossessed if you do not keep up repayments on

your mortgage.

It is worth thinking through what your income will be

when you retire, whether you have plans to take cash

out of your pension pot, or how your spouse/partner

would repay the loan if something unfortunate were

to happen. Your mortgage advisor will talk this through

with you but it helps to be prepared.

The last thing your lender wants is for you or your family

to experience ﬁnancial diculty because you have taken

out a mortgage.

Nothing in this guide constitutes regulated mortgage

advice and you should speak to your building society

or take professional ﬁnancial advice for more information.

If you are in your forties,

ﬁies or older you may have

heard or read stories that

getting a mortgage becomes

much more dicult with age.

It is becoming more and more common for people to

take out a mortgage with a term that lasts into their

sixties, seventies or eighties. The reasons why vary,

but could include:

• Higher house prices, so it takes longer to repay the

mortgage. Someone in their 40s borrowing for 30 years

will be in their 70s by the time the mortgage is repaid.

• Buying a home for retirement close to family and friends

or vital amenities. For some people this may mean buying

in a more expensive part of the country which might

require a mortgage.

• A divorcee needing a mortgage to buy a home of

their own.

• People returning from living overseas, wanting to own

a home in the UK rather than renting long-term.

• Parents, or grandparents, releasing equity from their

property to help children or grandchildren onto the

housing ladder. The so-called ‘bank of mum and dad’.

Many people may also want to unlock equity from their

home during retirement to:

• Make home adaptations, to improve accessibility or make

it better suited to their needs.

• Fund social care.

• Spend on ‘big ticket’ items like a holiday.

These are, of course, just some reasons why you might

need a mortgage. Your mortgage advisor will talk to

you in more detail about your speciﬁc needs and

circumstances, and what your options are.

Am I going to need a

mortgage into retirement?

There are a number of factors which will contribute

to your decision whether to borrow into or in retirement.

The amount you want to borrow, the length of the

mortgage term, the size of your deposit, and how much

you can aord to pay each month on an ongoing basis

are all important factors to consider.

Of course, much depends on the age at which you plan

to retire. You may, or may not, choose to retire at the state

pension age or earlier. As the UK no longer has a default

retirement age this decision is usually yours

You might even start to draw a pension while continuing

to work. Many people see retirement as a process, rather

than an event, and might work a couple of days a week,

take up directorships or contract work to supplement

pension income.

However, one thing to remember is that if your work is

manual and physically demanding then many lenders are

likely to be more cautious if you choose a late retirement

age. This is because your ability to continue doing manual

work may decrease with age.

1 If your employer does have a compulsory retirement age in place – for example

the police or ﬁre services – then it must be objectively justiﬁed

Aordability

If this is the ﬁrst time you have taken out a mortgage,

then it is important to understand what your lender looks

at when deciding whether to lend to you, and how much.

There are many ﬁrst-time buyer guides available to walk

you through the mortgage process, which you can read

together with this one.

Even if you have taken out a mortgage before, the rules

set down for mortgage lenders to follow may have changed

since the last time. There may be some new things to

consider – these are outlined below.

Essentially your lender wants to try to ensure, as far as

possible, that you can aord to repay your mortgage.

For most people your monthly mortgage repayments will

include the amount that is lent to you (the capital) and

any interest which accrues.

To work out what you can aord to repay each month your

lender needs information about your monthly income and

expenditure, as well as your credit history.

Income

Your lender will look at your salary, wages, or any other

regular income you have, aer income tax and national

insurance deductions have been made.

If you are self-employed then your lender may look at

your business accounts to check for a track record of

proﬁtability. They may also consider looking at projections

of future income, where these form part of a credible

business plan.

If you are a contract worker then your lender will likely

want to know about the length and terms of your contract

as well as the sustainability of any income, especially if the

number of hours you work changes from week to week.

If you are planning to borrow beyond your retirement

age then your lender will also want to know about your

pension, as once you retire you will likely be making

mortgage repayments out of your pension income

each month.

The way your lender looks at your pension will change

depending on how far away from retirement you are

and what type of pension scheme you have. There will

be more on this in later sections.

Expenditure

Your lender must also look at how much money you

spend each month. To do this they look at three things:

• Committed expenditure – Any credit and other

contractual commitments you have, which will not

be repaid in full when the mortgage is taken out

• Basic essential expenditure – Spending on food, gas,

electricity, water, telephone bill, council tax, buildings

insurance, essential travel expenses and any ground

rent or services charges you pay

• Basic quality-of-living costs – Spending which can

be reduced but only with diculty, such as clothing,

household goods and repairs, toiletries, television,

childcare and money for some basic recreational activities

Once this spending has been taken into account your

lender will look at how much money you have le to

pay for a mortgage.

Top tips for taking control

of your spending

There is a wealth of information out there

on ways you can save money. However, some

overarching things we would suggest are:

Budgeting in advance of your mortgage

interview and sticking to it. If you can show

a track record of controlled spending your

application is more likely to be successful.

Prioritising any luxuries. Do you get more

enjoyment from holidays or eating out regularly?

Spend your money there and cut out others.

Reducing your spend on non-essentials like

eating out for lunch, the morning coee or

morning newspaper. Small amounts start to

add up.

Comparing your energy and water taris and

any other bills. Consider installing energy and

water saving devices.

Credit history

Your credit rating is inﬂuenced by a range of factors. Any

time you take out a new credit card, personal loan, or agree

an overdra for your bank account your credit rating will

be checked.

The information that comes back will be based on whether

you’ve paid bills on time, any lease agreements you have

in place – for example to pay o instalments to buy a car

or mobile phone – and your address history.

Your lender will use your credit rating to inform their

lending decision, based on how much of a risk it is lending

to you.

Lenders with more automated processes will tend to use

credit scoring. This will use your credit rating to give you

a score within a range. If you score poorly this could lead

to an automatic rejection for a mortgage.

Other lenders will not be so determined by your credit

rating. They will still consult your credit rating and take

it into account but may allow you to explain certain entries

on your ﬁle during the mortgage advice process.

Top tips to improve

your credit rating

We cannot guarantee that taking any of these

steps can ‘ﬁx’ your credit rating but it is worth

considering:

It is important to pay your bills on time.

This goes for credit cards as well as for bills or

any other money you owe. If you cannot pay

on time, then approach your creditor. They are

likely to have a range of ‘forbearance’ options

which they can discuss with you.

Do not let any money you owe get to the

stage of going to court. By engaging with

your creditor early and honestly this is unlikely

to happen, at least in the short-term. If you

ignore the situation and a court judges against

you, this will seriously hamper your ability

to get credit in future.

Keep address information up-to-date and

credit rating is matched to you as a person rather

than your address, the rating agencies use your

address information to maintain information on

the ﬁle. Registering on the electoral roll provides

a public record of you living at your address.

Request to see your credit ﬁle.

If there is information on there you think

is misleading, then you can add a ‘notice of

correction’. This is a short explanatory statement

providing context. For example, if an ex-partner

incurred debt on a joint account.

What your lender is looking at

As with any other mortgage, your lender has to take

steps to check how much you can aord to repay each

month. They will interview you and look at your income

and expenditure and other information.

When expenditure is taken away from your net income

this gives an idea of the absolute maximum amount you

might be able to aord.

You can choose to make repayments close to this

maximum amount, accounting for a sucient buer

in the event that interest rates increase, and repay your

mortgage over a shorter term. However, this will have

consequences and you may only be able to keep up a

basic quality of living.

Alternatively, you can make smaller repayments each

month over a longer period of time.

There are some other important things your lender

will consider:

• Loan-to-value ratio – This means the amount that your

lender is willing to advance as a proportion of the value

of the home you want to buy. If you have a large deposit,

then this will bring down the loan-to-value ratio and

potentially increase your chances of getting a mortgage.

• Interest rates – Your lender will charge an initial rate

of interest on your mortgage. This could be ﬁxed for

a number of years: ﬁxing for 2 to 5 years is common.

However, your interest rate could also be variable. This

means that if the interest were to go up, you will have

to pay more each month.

Therefore, your lender will ‘stress test’ the aordability

of your mortgage. This is to see ensure that you will still

be able to aord the mortgage repayments if the interest

rate increases.

If you are close to retirement age, then your lender may

choose to stress test the interest at an even higher rate.

This is to take account of the possibility that you may ﬁnd

it more dicult to raise extra income to cover any higher

repayments once you are retired.

1110

Pension income

If you expect to be making mortgage repayments aer you

have retired or started drawing a pension, then your lender

will want to assess what your income might be beyond

that date.

The way your lender assesses whether you will be able to

aord to make repayments in retirement depends in large

part on how close you are to drawing on your pension.

If there are still a number of decades before you draw

a pension, then it is impossible to know how large your

pension pot is going to be. If you are on a Deﬁned

Contribution pension scheme, then the size of the

pot depends on how much you pay in and how your

investments perform. Your lender might be satisﬁed

simply by checking that you are making regular monthly

payments into the pot or by looking at your latest pension

forecast.

If you are on a Deﬁned Beneﬁt pension scheme, then much

is determined by whether it is based on your ﬁnal salary

or career average.

However, if you are closer to retirement age – say, within

ten years – then your lender is going to want to see more

robust evidence of what your pension is going to be. They

might ask to see documents such as your annual pension

statement to get an idea of what your income is likely to

be in retirement.

Maximum age limits

Lenders are allowed by law to set maximum age limits,

and many do. This means that you will have to repay your

mortgage by the time you reach the speciﬁed age. Your

lender will not usually agree to a mortgage where the term

extends beyond that age unless it is an exceptional case.

If you are borrowing on a joint mortgage then the

maximum age will oen relate to the age of the oldest

borrower.

Some lenders will have a lower maximum age limit for

interest-only mortgages and a higher age limit if you plan

to make repayments on a capital and interest basis.

Building societies are, in general, more ﬂexible than

high-street banks when it comes to maximum age limits.

Some do not have a maximum age at all and many will deal

with your application on an individual basis.

You can speak to a mortgage advisor at your building

society to ﬁnd out more about any maximum age limits

they have and other aspects of their lending policy.

1312

Things to think about

Building societies recognise that lending into retirement

isn’t always riskier – but the risks a lender has to consider

are dierent.

If you are planning to borrow into retirement, there are

a number of non-ﬁnancial things you should also consider.

These might not aect you now, but may do so as you get

older. If you are currently aected by any of the issues set

out below, you should contact your lender. Your building

society wants to help, and have people trained to do so.

Mental capacity

There is evidence to show that the risk of developing a

condition such as Alzheimer’s disease, or any other form

of dementia, increases with age.

If you want to guard against this risk, you can nominate

someone close to you to help run your ﬁnancial aairs in

the event that you do lose some mental capacity.

This is called arranging a Lasting Power of Attorney (LPA)

and you should contact the Oce of the Public Guardian

if you want to do this. Contact details are at the end

of this leaﬂet.

Joint mortgages

If you are borrowing with a partner, then the aordability

of your mortgage will be based on your joint income.

It can be a dicult thing to talk about, but you should

discuss with your partner how the mortgage would be

paid if one of you were to fall seriously ill or die.

You should take care to understand what might happen

with the estate, including whether any (and if so, how

much) pension income would transfer to the other partner.

Losing an income could mean that your partner is le

unable to repay the mortgage, so it is important to have

a contingency plan.

Inheritance

Many people plan to pass their home onto their family

or friends when they die.

You should be aware that taking out a mortgage against

your home could aect the value of your estate if it is not

repaid before death.

If you have life insurance, then this might pay o part

of the debt outstanding.

Without insurance your lender will expect to recoup the

outstanding mortgage out of your estate. That means your

heirs might have to sell your home to repay the mortgage

out of the equity.

It might be an idea, then, to include your heirs in any

discussions about taking out a mortgage if you are

concerned about the eect it may have on their inheritance.

1514

Life insurance

Another reason you may want to consider taking out life

insurance is if you have family members who depend on

your income to pay the mortgage.

You can take out a life insurance policy covering the

whole term of the mortgage so that if you were to die

before it is paid o, the insurance will pay most or all of

the outstanding debt.

The main choice to make is whether you want to take

out decreasing term insurance or level term insurance.

As the names suggest, the former will pay out a decreasing

amount over the term of the mortgage. The latter will pay

out a ﬂat sum whenever it is needed over the course of

the term.

You should note that life insurance is likely to be more

expensive and may be harder to get, the older you are

when you take out your mortgage.

You can also get insurance to cover a range of other

scenarios:

• Income protection – if you have to take time o work

because of an illness or accident then this insurance can

give you a regular monthly income, and help you to keep

up with mortgage repayments and other costs.

• Critical illness insurance – if you develop a critical illness

covered by the policy then this kind of insurance can give

you a lump sum.

Pension freedoms

Since April 2015 anybody over the age of 55 with a

Deﬁned Contribution pension has been able to take lump

sums out of their pension pot.

As outlined earlier, if you take a mortgage into retirement

then the aordability calculations are likely to be based,

at least in part, on the size of your pension pot.

You should be aware, therefore, that taking lump sums out

of your pension pot is likely to aect your ability to repay

the mortgage, and if done before you apply could aect

the amount you can borrow.

You should seek professional ﬁnancial advice if you are

unsure how to make the best use of your assets.

Who owns the home?

There are two ways you can own your home

with a partner:

Joint tenants

If one partner dies then the property will pass

to the surviving joint owner irrespective of any

provision made in a Will.

Tenants in common

You and your partner each own a speciﬁc

share in the property. On death the deceased

person’s share will pass to the estate via a

Will or intestacy.

If your lender agrees to a joint mortgage they

will usually insist that you and your partner

are joint tenants – but it is worth making sure.

You should also make provisions for anyone

else living at the property, such as adult children.

They will not have a right to continue living in

the property unless they inherit the whole share.

1716

What products are out there?

A lender’s standard range of mortgage products

will be available to you, subject to the maximum age

policy if they have one.

Some lenders might also have more specialised products

aimed at older borrowers with dierent rates or a higher

maximum age. Oen these will limit the maximum

proportion of the value of the property you can borrow,

and are likely to require a larger deposit.

Lenders are required to stress test the interest rate

on your mortgage, to ensure that you will still be able

to aord the mortgage if rates increase.

With some products the lender may stress test your

mortgage at a higher rate if you are borrowing into

retirement, as it will be more dicult to raise extra

income to pay higher interest once you are retired.

1918

Equity release

Another potential option if you already own your home

out-right or have a substantial amount of equity in it,

may be to get an equity release mortgage.

Most building societies do not oer equity release

mortgages directly, but may have an agreement with

another company and can refer you.

What is equity release?

Equity release is a way of unlocking the value of your

home. The lender/provider will either secure the loan

against your home or take an ownership stake in it.

Some products are available to people over the age

of 55, while others are only available to those over 60.

If you plan to release equity you may want to take

independent legal advice before doing so.

There are two main types of equity release:

Lifetime Mortgage

The lender will agree a maximum amount they are willing

to lend you. This is secured against your home but you

will retain full ownership.

You can choose to take the loan either in a lump sum or

to draw it down over time.

Interest will be charged on the amount of the loan you

take, as you take it.

With some products you can choose to pay part, or all,

of the interest if you want to. Usually you will be able

to switch to ‘interest roll-up’ later on if you can no longer

sustain the interest payments.

If you pay the full amount of interest then your debt

will remain at the level of the original loan. However

any interest you do not pay will be added to your debt

on a compounding basis.

This debt will be rolled up and recovered from the sale

of the property aer you die, or if you move into full-time

residential care.

You can get extra protections from a provider that is

a member of the Equity Release Council. Members of

the Equity Release Council operate a ‘no negative equity’

guarantee which means the size of your debt will never

exceed the value of your home.

Home Reversion Plan

Rather than lending you money, with a Home Reversion

plan the provider will either buy your home or a

percentage of it.

You will no longer own the percentage of your home

which you agree to sell, but will be able to continuing

living there, usually rent-free, until death or if you

move into full-time care.

Normally the provider will pay less than the market

value of your home. This osets the fact they do not

charge interest and also because they are unable to sell

the property until you die or go into permanent care.

You will know exactly the percentage of your home

which has been sold to the provider. They will recover

that part of the property’s value from your estate.

The process for getting an equity release mortgage will

usually take longer than for a traditional mortgage because

the lender/provider may ask you:

• To take independent legal advice

• To involve any heirs to your estate in the decision, though

it is up to you whether you choose to do so.

• Questions about your health and lifestyle. Overall the

advice process is likely to last longer and may take a

number of interviews.

• To register a Lasting Power of Attorney to manage your

debt if you lose full mental capacity.

2120

Shared ownership

If you would prefer to buy a share of a property rather

than own it outright, you might want to consider the Older

Persons Shared Ownership scheme. This could be a good

alternative to release some equity from your current home,

though it will mean moving home.

The scheme is open to people 55 and over. You buy

between 25% and 75% of the property and pay rent to

a housing association for the remaining part.

A number of building societies have expertise in lending

on shared ownership homes and may be able to help.

Useful resources

Age UK

0800 169 2081

Ɇ www.ageuk.org.uk

Building Societies Association

Ɇ www.bsa.org.uk

Citizens Advice

03454 04 05 06

Ɇ www.citizensadvice.org.uk

Council of Mortgage Lenders (CML)

Ɇ www.cml.org.uk

Equity Release Council

0844 6697085

Ɇ www.equityreleasecouncil.com

Money Advice Service

0300 500 5000

Ɇ www.moneyadviceservice.org.uk/en

Ofﬁce of the Public Guardian

0300 456 0300

Ɇ www.gov.uk/government/organisations/

ofﬁce-of-the-public-guardian

Older Persons Shared Ownership

Ɇ www.homebuyservice.co.uk/homebuy-options/

shared-ownership/older-people.html

Pension Wise

Ɇ www.pensionwise.gov.uk

The Pensions Advisory Service

0300 123 1047

Ɇ www.pensionsadvisoryservice.org.uk

Which? Money

Ɇ www.which.co.uk/money

2322

Customer

decision tree

What

Loan taken (or not)

Who

Direct and indirect

inﬂuences

When

Changing

circumstances

Notifying lender of changes and

impact they will have on ability

to repay your mortgage, such as:

– Moving

– Care costs

– Death (including spousal death)

– Retirement

– New dependants (adult children

returning to the home for example)

Credit: Council of Mortgage Lenders (CML) report –

Retirement Borrowing: Reality, Perceptions, Projections, Potential (December 2015)

Direct:

– Lender accepting your mortgage /

providing your mortgage

– Conveyancer progressing the legal aspects

of your mortgage

– Surveyor / valuer assessing the value

of your property

– Mortgage advisors (or direct with lender

for ‘execution-only’ mortgages)

– Solicitor setting up Lasting Power of

Attorney (LPA) where necessary

– Financial Ombudsman Service (FOS)

if you have a dispute with your

mortgage provider

– Family and friends, who may help

you make or be the reason for your

borrowing decision

– HMRC – stamp duty, inheritance tax

consideration etc.

Indirect (the customer cannot ‘see’):

– Financial Conduct Authority (FCA),

who set the aordability rules mortgage

lenders have to apply when assessing

whether you can aord your repayments

now and in the future

– How much can I borrow?

– How much do I need to borrow?

– Is a mortgage / re-mortgage the best

option for me?

– Is non-mortgage borrowing (Credit cards /

personal loans) more appropriate for my needs?

– What are the consequences for me / my family

of borrowing?

– Go to a ﬁnancial advisor

– Ask my family for advice

– Talk to a lender

– Go online – lender website

comparison websites

– Contact the Money Advice Service

(by phone or in person, online)

– Lender / professional advisor challenging

borrower assumptions

– ‘Back to drawing board’ if amount

wanting to borrow does not meet

aordability criteria

– Take out non-mortgage loan instead

– Take out a new mortgage

– Re-mortgage

– Equity release / lifetime mortgage

– Helping children onto housing ladder

– Interest only mortgage, capital repayment date

imminent, but insucient funds to pay o the

balance owed

– Want to purchase ‘dream home’ following

inheritance, but can’t buy home outright

– Want to re-mortgage remaining balance on

mortgage to reduce monthly payments

– Income reduction following

bereavement / divorce

– Buying a holiday home

– Using new pension freedoms to invest in a buy

to let property

– Downsizing to more expensive property

– Struggling to meet current mortgage

repayments due to illness

– Home improvements / adaptations

How

Help and guidance

with deciding

and weighing up

options

Why

Existing / potential

customer identiﬁes

borrowing need,

including...

2524

Mortgage guidance for your forties, ﬁies and

beyond. Mortgage guidance for your forties, ﬁies

and beyond. Mortgage guidance for your forties,

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guidance for your forties, ﬁies and beyond. Mort-

gage guidance for your forties, ﬁies and beyond.

Mortgage guidance for your forties, ﬁies and

beyond. Mortgage guidance for your forties, ﬁies

and beyond. Mortgage guidance for your forties,

ﬁies and beyond. Mortgage guidance for your for-

ties, ﬁies and beyond.

York House

23 Kingsway

London WC2B 6UJ

020 7520 5900

@BSABuildingSocs

www.bsa.org.uk

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