Borrowers over the age of 50 can find it extremely difficult to secure a new deal. This is because banks and building societies are often reluctant to lend to people who will retire before their mortgage term ends.
As a result, older borrowers often find themselves frozen out of the market.
That said, it’s not impossible to borrow in your later years. The key is being able to prove you can afford it.
When it comes to applying for a mortgage, there are a whole host of factors which a lender will take into consideration before deciding whether to offer you a deal.
This includes your income and expenditure, your credit rating, your age, and even how long you have been in your job.
How much can you borrow?
Generally speaking, lenders will usually want to see pay-slips from your employer – or typically three years’ accounts if you are self-employed.
They will then use income multiple calculations based on your salary to help give an indication of how much you can borrow.
You may be able to get up to four times’ your salary at a push if you apply on your own.
But remember: each lender will have different criteria, and will offer different income multiples - so you need to do your research.
How do they work out if you can afford a mortgage?
Affordability calculations are a big part of the application process, and will be a major consideration when a bank is deciding whether or not to lend.
As a result, mortgage providers will now scrutinise a potential borrower’s expenditure far more closely than ever before, to ensure they can afford the home loan both now and in the future.
They will go through your statements with a fine-tooth comb and weigh up your income against your monthly outgoings.
This will include debt repayments (such as personal loans and credit cards), utility bills, insurance payments, as well as “lifestyle costs” or discretionary spending, such as socialising and eating out.
Securing a mortgage when over 50
Mortgage lenders will look at your credit history
Mortgage lenders will look carefully at your credit report before making a lending decision, as this shows how financially responsible you are.
They will use your credit report – along with your salary and personal details – to work out how much of a risk they think it is to lend to you.
The stronger your record, the better your chances of getting accepted for a deal.
Equally, if you have any black marks against your name, such as a recent County Court Judgement (CCJ), this could make it very hard for you to get a mortgage.
Also bear in mind that simple oversights, such as not being registered on the electoral roll, or failing to close down credit card accounts that you no longer use, can have a negative impact on your credit rating.
Before applying for a mortgage, you should always check your credit report carefully to see if there are any reasons why your application could be refused.
You can get your credit report from a credit reference agency, such as Experian.
Find out more about checking you credit report
Does your age affect your mortgage application?
Banks and building societies are often less willing to lend to older borrowers, as they are often unhappy about granting mortgages to people who will have retired before their mortgage term ends. And lending criteria tightens further year on year.
What you need to know if you still have a mortgage in your 50s
The key here is being able to be able to prove to a lender that you have adequate income to support the mortgage after retirement. This might include proof of regular income from pensions and investments, as well as from insurance policies – and possibly from a buy-to-let property if you have one.
Show you can afford your mortgage payments
The Financial Conduct Authority wants lenders to be sure borrowers can afford repayments if their mortgage extends into retirement.
While this has prompted some lenders to reduce the maximum age a borrower can be when a loan comes to an end to 70 or 75 – the watchdog has urged banks not to take a “computer says no” approach.
This means that lenders should base their decisions on a borrower’s ability to meet their monthly repayments, rather than on arbitrary age limits.
Age isn't the only factor that can affect your mortgage application - find out more
Provide proof of income
If you have already stopped working, or if you are approaching retirement, you need to be able to demonstrate to a lender that you still have enough income to make repayments – and that the mortgage will remain affordable.
This could, for example, be proof of regular income from pensions and investments (such as an annuity), as well as from insurance policies.
A good credit report can increase your chances of getting a mortgage - find out how to improve yours
Some banks are willing to lend to older borrowers
When looking to secure a mortgage as an older borrower, it’s important to realise that not all banks and building societies take the same approach.
Some lenders have realised there is a growing demand for mortgages running past the traditional retirement age.
With this in mind, it is well worth scouring the market to seek out mortgage providers offering the greatest flexibility on age.
Search for a specialist lender
Equally, if you are struggling to get accepted, it may be worth approaching some of the smaller building societies which may take a more flexible approach, as opposed to using an automated system.
As these lenders are more likely to take your particular circumstances into account – this could improve your chances of securing a deal.
It’s also well worth enlisting the services of a broker, as they may be able to access deals specifically designed for older borrowers. This can help you find an option that you otherwise might have