How to get a Mortgage if You’re Over 40 

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Why are over 40s being declined mortgages and what can be done?

You'll have to borrow a lower amount

Retirement

Preparing for a mortgage at over 40 years old

Open & Honest Mortgage Broker in Harrogate

The simple answer is yes, you can get a mortgage if you’re over 40. This does depend on your situation regarding your application, however, this is an option in the mortgage world.

For applicants who are looking to extend their mortgage term beyond the age of retirement, the mortgage lender may want to have an insight of a rough estimate on the amount of pension income you are going to have.

Through our experience, we have found that there are many instances where customers who are in or over their 40s are usually First Time Buyer in Harrogate. Furthermore, many customers in this demographic usually are declined because of their age.

Why are over 40s being declined mortgages and what can be done?

To start, let’s go back to the past. Before the time of computerised credit scoring and the levels of regulation that are common today. For instance, if you visited a building society in search of a mortgage, it’s likely to you would speak to your branch manager.

Their job it looks at your personal situation such as how well you have been able to manage your current account. From this, they would conclude if they will approve your application.

In the case where you are accepted, it’s then time to get the advice you need regarding the amount you could borrow which is usually present as multiple of your gross salary.

The one problem with this was that these income multiples were not factored into the age of the applicant. This means that whether you were 30 years old or 50 years old, you could borrow the same mortgage amount either way.

You may be wondering what the problem is with this as you may see it as a fair arrangement. However, if both applicants were coming towards to retire at the age of 65, each individual would have different outcomes.

An example of this is if an applicant had a £70,000 (capital and interest combined) mortgage with a national interest rate of 5%:

• An applicant who is 30 years old. If they had a 35 year mortgage term they would be paying £252pm approx.
• An applicant who is 50 years old. They would be paying £395pm approx if they had a 15 year mortgage term.
  

With this example, both applicants earn the same, looking to retire at the same age, with the same mortgage interest rate and the same overall amount to pay back.

The one difference between the two is that the second applicant’s monthly payments are a lot higher. Therefore, if mortgage rates end up rising, it could increase the risk of arrears and repossession.

Because of these reasons, the mortgage calculator now factors in the maximum term of the mortgage (i.e., how old you are) along with the income you bring in and the amount you have regularly going out.

You’ll have to borrow a lower amount

The concern isn’t that older customers are being turned down but the amount they were thinking of borrowing is a lot lower than expected. As the general public, we are reminded consistently that we will need to work until a later age by the Government before qualifying for our State Pension. Unfortunately, the banks don’t seem to keep this in mind when granting mortgages. We can take a more in-depth insight into this:

This isn’t always the case for everyone because some occupations that involve manual work will not be fit for those in your seventies.

Lenders are closely monitored when it comes to repossessions and arrears cases which means they want to minimise this risk. Taking a property into possessions can cost a lot of money and build up a negative reputation for the lender. With this in mind, when they are approving mortgages for mature applicants they don’t want to be seen kicking out a vulnerable older person because they couldn’t afford their payments.

Lenders will consider granting mortgages beyond normal retirement ages as long as there is enough evidence proving that they can keep up with payments after retirement. In terms of evidence, you could provide a letter from your Pension provider with a projection of your future income. One issue here is that many people will usually take a reduction in income at retirement. This means that you will need to demonstrate that the mortgage monthly

Retirement

In 2011, the default retirement age was removed which meant employers no longer had the power to force an employee to retire. Therefore, lenders use the State Retirement age ad the age that the mortgage must be paid off, however, these days, lenders will let the retirement age be self-declared.

For those in this current situation, you must be ready to answer the question of how you will afford your mortgage in the future. Consumer protections and regulations are there with the purpose to protect consumers as well as stimulate judicious lending.

Preparing for a mortgage at over 40 years old

We have a team of Specialist Mortgage Advisors in Harrogate who will be able to provide a helping hand through the process and will recommend you the best way for your mortgage application and the options that are appropriate for your situation.

Date Last Edited: December 28, 2023