Can you extend mortgage to 85?
OLDER homeowners locked out of the mortgage market because of their age may have been offered a reprieve.
Many people approaching retirement are trapped on overpriced mortgages or are struggling to extend their mortgage term to make payments more affordable.
Lenders are reluctant to offer them mortgages that run into retirement when their income is likely to drop, making it harder to service the debt.
Some have even rejected mortgage applicants in their 40s or 50s, as the standard 25-year repayment term would run beyond 65.
Now banks and building societies say they are acting to help these “mortgage prisoners” by raising their maximum lending ages.
Nationwide has just announced that it will offer mortgages to pensioners as old as 80 and give borrowers until age 85 to pay them off. Halifax will raise its mortgage maturity age to 80 and other lenders are expected to follow suit. This has been heralded as good news for the growing number of older borrowers who cannot pay off their mortgage before age 65. However, it will not help everyone. AGE DISCRIMINATION Tougher regulatory checks introduced in April 2014 have made it harder for many middleaged and older people to get a mortgage. Lenders fear they could be accused of irresponsible lending if borrowers cannot pay off their mortgage in retirement.
Halifax and Nationwide now claim to be making life easier for older borrowers but experts say they have not gone far enough and many creditworthy older
PLANS wiLL coNSigN trAditioNAL 25-yeAr termS to duStbiN
MOVES to offer mortgages to age 80 and beyond could sound the death knell for traditional 25-year repayment terms.
Thanks to spiralling house prices, growing numbers of borrowers cannot afford to buy their first property until their late 30s or early 40s.
This makes it hard to climb the property ladder and pay off their mortgage before they people will finance.
Mark Harris, at mortgage broker SPF Private Clients, says older borrowers must still meet stricter lending criteria. “Borrowers who need a mortgage beyond retirement age must still prove they have enough pension and other retirement income to pay off the interest and capital.”
Adrian Anderson, director of mortgage broker Anderson Harris, says Halifax and Nationwide could have gone further as many smaller building societies already lend up to age 90. “National Counties Building Society has no upper age limit as long as borrowers can demonstrate they can afford the still struggle to get mortgage. It also allows several names on the application so younger people can use their income to help out parents if required, or vice versa.”
Furness Building Society and Harpenden Building Society will also lend to older borrowers with solid income, Anderson says.
Simon Tyler, head of broker Tyler Mortgage Management, points out Nationwide’s move only applies to its existing customers with plenty of spare equity and a healthy retirement income. “It will do little to help older borrowers in general to get a mortgage.”
Tyler says a number of smaller lenders have removed upper age limits, including Cambridge and Dudley building societies. “But I turn 65. Matt Sanders, head of money at GoCompare.com, says greater flexibility will allow borrowers in their 40s and 50s to take mortgages over longer terms. “This will reduce the monthly cost and help to pass stricter affordability criteria.”
Somebody taking out a £200,000 mortgage over 25 years at 3 per cent would face capital and interest payments of would like to see even more lenders offer “inter-generational mortgages” where children can inherit the loan along with the property.” David Hollingworth, broker at London & Country Mortgages, says too many high-street lenders still impose restrictive age caps of either 70 or 75. “Smaller building societies such as Bath and Family have a more individualised approach, while Metro Bank has no stated maximum age and can consider each case on its merits.”
If you want to extend your mortgage term you will need to produce evidence of your income to meet your lender’s criteria, which will differ according to your bank or building society.
Hollingworth says: “Lenders such as NatWest and Nationwide will vary the evidence required depending on how far from retirement the borrower is.”
Hundreds of thousands of homeowners with interest-only mortgages are reaching retirement with unpaid debt and Hollingworth says lenders could help by allowing them to stretch repayments over a longer term.
“Someone with a shortfall of £50,000 would pay £898 a month on a five-year term at a rate of 3 per cent but the same mortgage would cost just £345 a month if it could be spread over 15 years.”
Peter Mugleston, director of OnlineMortgageAdvisor.co.uk, says: “It is all well and good to allow borrowers to pay back into their 80s but do they really want a mortgage so far into later life?”
Borrowers who extend their mortgage because they cannot afford to pay it off could run into financial difficulty later, especially if interest rates rise. Mugleston says: “It is a more sensible idea to borrow less.”
‘It will do little to help older borrowers’
£948 a month. If they extended their loan to 35 years, then the cost falls to £770 a month, a reduction of £178, he says.
“This could make the difference between qualifying for the mortgage in the first place and being declined.”
Sanders says lenders need to go further: “If a borrower shows they can afford repayments, their age should be immaterial.”