Can you get a mortgage at age 85?

Harvey Jones

Mortgage lenders have been easing their rules on lending to older homeowners and some now offer deals running to age 80 or beyond. Money expert Harvey Jones investigates.

Who is upping the maximum lending age?

Nationwide Building Society recently lifted its maximum lending age and will offer mortgages to pensioners as old as 80 and give them until 85 to pay them off. Halifax has raised its mortgage maturity age to 80 and other lenders are expected to follow suit. 

So why are they doing this?

 

Unpaid debts

Growing numbers of elderly mortgage holders are heading towards retirement still owing tens of thousands of pounds. The problem will worsen due to the interest-only mortgage crisis, as underperforming endowment plans sold in the 1980s and 1990s will leave hundreds of thousands with a shortfall at maturity.

Older homeowners who want to extend their mortgage term can get an unsympathetic hearing from lenders, who fear they will struggle to service their loan when the income falls after they stop working.

 

Tough new rules

Stricter regulatory checks introduced in April 2014 have made it even harder for older people to get a mortgage. Banks fear they could be accused of irresponsible lending if borrowers cannot pay off their mortgage in retirement.

Some have even rejected applicants in their 40s or 50s, as the standard 25-year repayment term would run beyond age 65.

Now they are easing up and rightly so. With more than a million people already working beyond age 75, lenders need to keep up with changing social trends.

 

Feeling is mutual

Smaller lenders, particularly mutual building societies, can be more flexible. The likes of Bath, Cambridge, Dudley Family, Furness, Harpenden and National Counties are more open to applications from older borrowers. A mortgage broker can help you find a flexible lender.

The drawback is that you still have to show you can service your mortgage in later life, typically from your pension and other retirement income.

Naturally, the lender will also expect you to pay off all the capital too.

There are other limitations, for example, Nationwide’s offer only extends to existing customers with decent income and spare equity. It does not apply to new borrowers.

 

Long-term deal

Easier lending policies may help younger borrowers as well. As first-time buyers get on to the housing ladder later, they have less time to trade up to a family home and pay off their mortgage.

Now they may find it easier to extend their mortgage term in a bid to reduce their monthly repayment costs.

Somebody taking out a £200,000 mortgage over 25 years at 3 per cent would face capital and interest rate payments of £948 a month. If they extended their term to 35 years the cost would fall to £770 a month, saving them £178.

In some cases, this could make the difference between qualifying for the mortgage and being declined.

 

Lifelong mortgage

While greater lender flexibility is welcome, it does beg one question. Do you really want to be paying off your mortgage into your 80s?