Lending To Older Homeowners


Updated on 17 February 2009 | 11 Comments

It's all very well researching the best mortgages on the market, but what if you can't get some of them because of your age?

There are plenty of articles on Fool.co.uk detailing the best mortgages for various consumers -- remortgagors, first-time buyers, those with jumbo mortgages, or with tiny deposits.

But there is another group of borrowers that is seldom mentioned -- the older homeowner.

And while they can read about the best deals, they can't always get them because they are simply too old to be accepted for a mortgage.

But lenders have changed their policies to adapt to our ageing population over the last couple of decades and are now more willing than ever to lend to older borrowers. Within limits.

How have we changed?

We now live and work well beyond retirement. Men aged 65 can expect to live for a further 17 years on average and women a further 20 years, according to the Office for National Statistics.

We also buy and pay off our mortgages later in life. In1980 the average age of a first-time buyer was 26. By 1990 it was 28 and by 2000 it was 30 where it has hovered ever since.

The age at which we are divorcing has also increased, and now stands well into the forties for both men and women. This has led to an increase in `second first-time buyers' whose mortgages are more likely to run into their retirement.

So have mortgage lenders caught up with us?

I decided to ask 10 of the UK's biggest lenders to find out what their policy is on lending to older homeowners.

Upper age limits

Most lenders have upper age limits on borrowing and this usually refers to the age at which the mortgage must be fully repaid. So you might be forced to repay your homeloan over a shorter term if you are borrowing at 60 for example.

Halifax and HSBC do not have an upper age limit.

Neither does Bristol & West (nor parent Bank of Ireland). However, they do specify that the mortgage must be repaid by the applicant's normal retirement age (not including buy-to-let borrowers).

RBS has a maximum age limit of 70, Nationwide's and Alliance & Leicester's is 75 and Abbey's is 85.

Woolwich won't lend beyond 70 or retirement age, whichever is earlier, so if you are five years from that age you will only be able to get a five-year mortgage.

Cheltenham & Gloucester has a maximum age of 75 and for joint customers this is based on the age of the oldest borrower. The term must be reduced to fit within this limit. However, the lender pointed out that in certain circumstances the application can be referred to underwriters for a decision.  

Bradford & Bingley has different age limits for different types of borrower. Standard borrowers must reach the end of term by 70, self-employed borrowers by 75 and buy-to-let borrowers by 85.

Future proof of income required

When younger borrowers take out a mortgage they are not normally required to predict or prove their income in five or 10 years' time, but understandably this is a consideration if your mortgage term will run into your retirement. Some lenders ask not only for proof of income on application but also verification of income beyond retirement.

Halifax for example said that on those applications where the term will run into a borrower's retirement it must be satisfied that the client's income is verified both currently and in retirement.

Nationwide also does this, plus if the borrower is due to retire within five years the lender will ask for evidence that they can meet the repayments.

For standard borrowers Bradford & Bingley requires proof that the borrower has sufficient income to repay the loan after retirement age (65).

Other restrictions

In addition to the two most common restrictions, some lenders have other requirements.

For example Cheltenham & Gloucester requires a 25% from any borrower making an application at the age of 65 or over, offering mortgages to a maximum LTV of 75%, compared to 90% for younger borrowers.

HSBC pointed out that it doesn't impose different criteria on older borrowers but it does have responsible lending principles, including having a regard for a customer's mental faculties. If in doubt, the lender will ask the customer to be accompanied by their
professional legal adviser or a member of their family.

Abbey said that its lending criteria, such as LTV or length of loan available, will change depending on the individual's risk profile, of which age is one factor.

The Bank of Ireland's First Start mortgage is actually aimed at first-time buyers and includes guarantors, but they must be 60 or under at the start of the mortgage.

Of course, as well as being as flexible as possible with older borrowers, lenders also need to lend responsibly and this sometimes means imposing restrictions on what people over a certain age can borrow. If you know of any other lenders that are particularly flexible or restrictive with older homeowners please let us know.

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