Things to think about when setting the Mortgage Term
This “maximum age for a mortgage” article is aimed at borrowing “standard” repayment mortgages using “earned” income for properties you plan to live in, unless otherwise stated.
Other specific solutions such as Retirement Interest only (RIO), Equity Release and Lifetime Mortgages might provide a longer term solution.
Maximum Age limits for a Mortgage
Mortgage Lenders have tried to tailor mortgages to finish before the normal retirement age which historically was age 65.
In recent years they have adjusted this to match age the current retirement age 67* and, more recently most Mortgage Lenders have been forward thinking and moved this on to age 70 recognising than a mortgage is a long term loan and there is a creep upwards. In addition, a good number of mainstream “high street” Mortgage Lenders and a few specialist Mortgage Lenders that go to age 75. There’s also the possibility of age 80 but this in my opinion needs to be talked through with a professional Mortgage Broker, such as Niche Advice.
If you want lower retirement age then this should factored in. Likewise, if you plan to drop the number hours worked towards the end of your career. Conversely, we must also recognise there are folks that never want to retire!
*for more information on the State Retirement Age click here to be re-directed to the Government website.
Interest only & Maximum age for a mortgage Limits
Mortgage Lenders are generally more conservative when lending on an “interest only” basis on properties where you reside in. As such they are more likely to strictly observe a maximum age limit of 70 years.
Check with your Employer
Just because you say you can work to the Mortgage Lenders mortgage age limit it does NOT always follow that you can so you should make sure your employer will continue to provide employment for this duration.
That said, since the “Default Retirement Age of 65 in April 2011” it’s hard for Employers to enforce retirement of employees however there are exceptions around physical and mental capacity to perform the role.
Occupation
The Underwriters of a Mortgage Lender’s will also make judgments on the feasibility to perform the job to certain ages. For example, the Manager of Labourers are much more likely to acceptable than the Labourers themselves.
Sportspersons have a short careers.
Also the viability of performing a number of jobs into your dotage can be an issue.
Setting the Mortgage Term
A mortgage is a large commitment and for it to be workable most Mortgage Lenders insist on a minimum mortgage term of 5 or 10 years.
In addition it is normally prudent to knock a year off (or six months if the Mortgage Lender offers this facility) in your calculations as Mortgage Lenders want the mortgage to be paid before the maximum age limit as the mortgage chain can take months to complete.
For example:
Betty is aged 60 years. She is willing and able to work to the age of 75 years which is her chosen Mortgage Lenders maximum age limit. The Mortgage Lender only allows a mortgage term to be set in whole years.
Therefore it is prudent to set the term should for 14 years in length. This will allow her space to pass a birthday whilst the mortgage process is going on.
Mortgage Lenders will also have a maximum term, typically of 25 years to 40 years. So if you were 20 years old then the mortgage would only go to age 60.
Setting the Mortgage Term for “joint” mortgage applications
The maximum mortgage limit is normally based on the eldest applicant’s age.
If you do NOT need to use the eldest applicant’s income in the mortgage affordability assessment then there are Mortgage Lenders than will allow the eldest person to be older than norm at the term end, and in fact certain lenders do NOT have a maximum. However, anything over age 75 years should in my opinion needs to be talked through with a professional Mortgage Broker, such as Niche Advice.
Pension provision and Maximum age for a mortgage
It is common for the Mortgage Lenders that go to age 75 years to check that you are paying into a pension, particularly if you are 10 years away from the State Retirement Age and/or your own stated retired age. This is because it provides the Mortgage Lender with reassurance that the mortgage is more likely to be repaid if you are forced into premature retirement.
Why do some people set long mortgage terms?
The length of the mortgage term can directly affect the amount you are able to borrow. This is because the monthly mortgage payment becomes lower. However, you must note borrowing the money for longer will result in the overall cost will be higher so it not always advisable and should be talked through with a professional Mortgage Broker, such as Niche Advice.
Example, Single lady employed on £50,000 per annum buying a house with a 15% deposit. No personal debts or dependants. Council tax £150. Taking a 4.20% five year fixed rate on a repayment basis.
| Mortgage Lender | Term 5 years | Term 10 years | Term 25 years | Term 35 years |
|---|---|---|---|---|
| Barclays | £91,626 | £148,038 | £217,318 | £230,414 |
| Halifax | £103,320 | £173,540 | £250,000 | £250,000 |
| NatWest | £106,300 | £174,900 | £222,500 | £222,500 |
Figures as of 11/2/2024 run on the respective lenders’ intermediary websites.
Can I shorten my mortgage length?
There could be a good reason to reduce the term of your mortgage. The terms of your mortgage contract will guide you on the most cost effective way of doing so. Many mainstream “high street” banks allow you to make overpayments within annual limits, typically 10% per annum during a fixed rate. Standard Variable Rates and some Trackers allow unlimited overpayments.
Sometimes borrowers set the mortgage term for longer at outset to enable greater borrowing and use these flexible overpayment facilities to reduce the term back.
Non-earned income
The above discussion was all about “earned” income. If you income is derived from pensions, annuities or property income, and the relevant UK taxes have been paid, then mortgage borrowing beyond the age of 70 years may be more readily available to you.
Buy-to-let
Your age is normally less important here. In fact there are Buy-to-let Mortgage Lenders that do NOT have a specified maximum age, instead the duration would be limited to the term maximum i.e. 25 to 40 years depending on the lender.
Alternative Solutions
If you want to borrow beyond in later life you may also want to consider Retirement Interest only (RIO), Equity Release and Lifetime Mortgages.
Other considerations
It is usually prudent to have insurance to protect your health and life when taking out a mortgage. When borrowing later on in life a claim is more likely to take place so provision for this appears to be even more wise.
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