Recent mortgage Q&A
What mortgages are available for the over 50s?
If you are between 50 years of age you are likely to find that you have a reasonable selection of mortgage deals to choose from. If you are over 50 you are likely to find that your options start to become more restricted due to the change in lending criteria that lenders have introduced over the last couple of years to attempt to reduce the risk on the money that they lend to customers.
What are the changes that have been made?
The main change that has been made is that lenders are beginning to insist upon mortgages being completely paid off before you reach old age. Some lenders used to define this as being at 80 years old, but have recently cut this to 75. What this means for 50 year olds is that they will still be able to take out a 25 year mortgage. However for those over 50 there is going to be a decreasing maximum term with increase in age so someone who is 55 at the point of application will only be offered a maximum of a 20 year mortgage. Some lenders have gone even further and reduced the maximum age at the end of the mortgage term to 65, which was in line with retirement age. However with the removal of mandatory retirement and the increase in retirement age to 68 there is a little more flexibility creeping back into the age limits on some mortgages.
Why has this happened?
Lending generally had no age limit before 2008, but with the credit crunch lenders have become seriously risk averse and older borrowers were some of the first to be cut out of the market. Building Societies took up the slack for a while but they are now being inundated with mortgage applications from older borrowers due to banks no longer providing viable options. This means that even Building Societies are now being highly selective in the applications they accept because they just cannot afford to lend to everyone who wishes to borrow.
Part of the problem
Part of the problem for lenders is that many over 50s mortgages are on interest only products and these have almost entirely been phased out of residential mortgages. With investment policies often coming up short the repayment of the final amount is often not possible. However the length of the term available on a repayment mortgage also makes this an unaffordable option, leaving many people stuck and having to sell off other assets in order to make up the shortfall.
Plan ahead
In order to avoid running into the situation where you find yourself stuck at the end of an interest only mortgage you will have to plan as far in advance as you can. Getting onto a repayment mortgage sooner rather than later will open up your options later on. Even if you are already over 50 you may have more options than you think and should consult a mortgage broker to help you out.
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