Please bear in mind that the below information is intended solely for reference purposes and should not be taken as any kind of personal, financial or mortgage advice in Newcastle.
Looking at this with an initial view, the answer to this question is yes, there may be a possibility that you could get a mortgage if you are aged 40+. This entirely depends on what your situation is, however.
According to an old survey that taken out on mortgage brokers by the Nottingham Building Society, a large selection of those surveyed had said that they had seen a rise in mortgage applications being turned down for customers who were in this age bracket.
When speaking directly to these customers who were between the ages of 45 & 54 and had been declined during the time period that was being analysed, once again it all came down to age as the biggest factor.
In this article we will take a look at why we feel that these home buyers are experiencing this, and the positive steps you might be able to take if you would like to take out a mortgage over the age of 40.
To gain a much deeper insight into the position these mortgage applicants are in, it’s important that we look at previous years, way back to before the introduction of computerised credit scoring and increased industry regulation.
If you were to go and speak to someone at your local building society, asking for a mortgage, you will probably have been interviewed by the building society branch manager or one of their own in-house mortgage advisors in Newcastle.
They would individually make review all of the personal information you have provided, including how well you conduct your finances in your current account, before making a decision on whether or not your mortgage application should be approved.
If you were fortunate to be approved, then you would be provided with information on how much earners in similar positions to you, were able to borrow for a mortgage. This would been given to you as a multiple of your gross annual salary.
To provide you with an example of this, if you were earning a figure of approximately £20,000 per annum and the mortgage lender’s income multiple was 3.5x, then you would be obtaining a mortgage of around £70,000.
What this method of income multiplier didn’t factor in, however, was how old you are. Because of this, it didn’t matter what your age actually was, whether or you were 30, 40 or 50, you would typically be able to borrow the same amount on a mortgage.
At face value, this is what it might look like, however, if two mortgage applicants were both set to retire at the age of 65, then one of these applicants might have a term upwards of 35 years, whilst the other may only have a 15 year term, meaning they will have higher monthly payments.
Using the previous example of a £70,000 (capital and interest) mortgage, with a national interest rate of say, 5%, it could look like this:
So in this example, we have two earners that are more or less identical, with the same amount of mortgage debt, but applicant two has much higher monthly mortgage payments than the other applicant.
If the national interest rates were to suddenly rise up, then there would be an much higher risk of arrears occurring for applicant who has higher monthly payments. At the end of the day, risk is what trying to be minimised in all of this.
With this in mind, modern mortgage calculators tend to now factor in the maximum length you could take a mortgage term for (or in simple terms, your age), as well as your income and your expenditure.
In the past, the BBC got in touch with our very own “Moneyman” Malcolm Davidson for his thoughts on the Nottingham Building Society study. His perspective was not so much that older customers are being declined, but that they cannot borrow as much as they perhaps hoped they’d be able to.
Of course, the irony in this situation, is that we are in a repeated cycle of being reminded by our own government that we will have to work until a later age, as they raise the retirement age for us to be able to qualify for our state pension.
It’s a shame that the high street lenders don’t necessarily take this into account when they look at granting customers their mortgage. Below we look at this a bit more in-depth.
First and foremost, there are a various industries in the country that are manual labour focused. The likelihood of anyone continuing to work in that industry as they head into their seventies and maybe even beyond, is small.
In addition to this, mortgage lenders are pretty closely regulated when it comes to repossessions and arrears cases, as these look bad and they want to avoid them if possible. Taking a property into possession is a fairly costly process and can attract bad press for these mortgage lenders.
Regarding the topic of mortgages for much older mortgage applicants, they certainly don’t want to have to kick a pensioner out of their own home just because they can’t afford their mortgage anymore.
Thankfully, many mortgage lenders out there have started to consider granting mortgages to applicants beyond the typical retirement age, so long as you are able to show that you can afford a mortgage post-retirement.
In order to do this, you would usually give your mortgage lender with a letter from your pension provider that would project what your future income is going to be. The problem in this regard, is that even with this, your income will probably be lower at the point of retirement than it used to be.
This means when seeing if you can afford a mortgage, a mortgage lender would need you to prove that you are able to do so, even with a reduced income at the point of your retirement and beyond.
Whilst great in theory, this doesn’t always work well in practice, unless you are only looking to take out a smaller mortgage, at which point you probably don’t need to take out a mortgage past that point.
If you cast your mind back, you may remember that in 2011, they scrapped the default retirement age, as well as making it so that your employer cannot make you retire anymore, if you do not wish to do this.
Because of this, though there will be some mortgage lenders who use the state retirement age as the general guide for when a mortgage should be fully repaid, it is becoming much more common for customers to be allowed to self-declare their retirement age.
They will want to check the plausibility of this though, so if you had a highly physical job such as a firefighter, and you aimed to declare 72 as your retirement age, this wouldn’t necessarily be seen as realistic.
We previously had a case where one of our mortgage advisors in Newcastle where a mortgage lender was actually in agreement to make a 9-year mortgage for a 66-year old accountant, who had declared they were going to retire at the age of 75.
That of course is a pretty extraordinary circumstance that won’t apply to most people, and is not a guarantee that you could do the same thing, though it shows that mortgage lenders can be flexible. To better your chances, you should prove how you are able to afford a mortgage at retirement.
Consumer protections and regulations are in place nowadays to protect consumers and encourage careful lending.
As you get older, there are also many different paths you could take to protect you and your home, such as equity release in Newcastle via taking out a lifetime mortgage, or even an alternative to this such as a retirement interest only or perhaps a term interest only.
A trusted and qualified later life mortgage advisor in Newcastle will be able to take a look at your circumstances and start a conversation with you and your family, if you are nearing the qualifying ages for these mortgage types and would like to go ahead, or even look at alternatives routes.
If you are a first time buyer in Newcastle, or are looking at moving home in Newcastle, please do not hesitate to contact us, or book your free mortgage appointment online, and get in touch with a trusted member of our fast & friendly mortgage advice team.
To understand the features and risks of equity release in Newcastle, 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 Newcastle 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.
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