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Straight away, the answer is yes, you can get a mortgage over 40 years old. This does, however, depend on your situation.
In some circumstances, where your mortgage term extends past your intended retirement age, you may be required to provide an estimation of your pension income to your lender.
Over the years we have seen lots of declined mortgage applications from first-time buyers in their 40s. We often find that when dealing with customers aged between 45-54 with declined applications during the last two years, the reason for being declined was due to their age.
In the past, when you visited a building society to seek a mortgage, you’d likely have an appointment with a Branch Manager or Mortgage Advisor. This was before computerised credit scoring and regulations that we know today. The decision process of whether to approve your application would be them looking at personal circumstances such as how well you’ve managed your current account. If they decided to accept your application, then you would be advised of how much you could borrow. This would typically be a multiple of your gross salary.
These income multiples don’t account for age so, you could borrow the same amount if you were 30 or 50 years old. Even though this seems fair, suppose both applicants were due to retire at 65 years old, it would have different effects on both individuals. Let’s explore this example of using a £70,000 (capital and interest) mortgage using a notional interest rate of 5%.
This example shows two identical earners with the same mortgage debt, but the second applicant has a higher monthly payment. Therefore, the risk of repossession and arrears due to the mortgage rates shooting up is likely. This reason is why modern mortgage calculators consider the maximum term of the mortgage (i.e. your age) along with income and expenditure.
Despite being constantly reminded that we will be working until an older age due to State Pensions, banks don’t seem to consider this when granting a mortgage.
One of the requirements when it comes to lenders granting a mortgage to someone beyond retirement age is that you would need to demonstrate that you can afford the payments after retiring. To prove this, it’s best to obtain a letter from your pension provider that showcases your future income. The problem is that the majority of people reading this will likely take a reduction in income at retirement. Therefore, it’s expected that you can still afford your mortgage from that reduced income. In reality, this can hardly be a success unless you require only a very small mortgage so you wouldn’t probably need to stretch the mortgage past your retirement age anyway.
In 2011, the default retirement age was scrapped, and your employer can no longer force you to retire. Therefore, fewer lenders are using the State Retirement age as the age you must have your mortgage paid off by, and the majority are letting people decide the age they intend to retire.
When you’re over 40 and seeking a mortgage, you are questioned on how you would afford your mortgage in the later years. It’s key to remember that these regulations are there to protect consumers and sensible lending. In some circumstances where your mortgage term runs past your normal state retirement age, you will need to demonstrate that you can keep your payments sustained and provide this proof if requested.
Please note that the above information is for reference purposes only and is not to be viewed as personal financial or mortgage advice. For the professional and tailored advice you need, get in touch with our team for Specialist Mortgage Advice in Derby.
Date Last Edited: December 6, 2023
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Derbymoneyman.com & Derbymoneyman are trading styles of UK Moneyman Limited, which is authorised and regulated by the Financial Conduct Authority.
UK Moneyman Limited is Registered in England, No. 6789312 | Registered Address: 10 Consort Court, Hull, HU9 1PU.
Authorised and Regulated by the Financial Conduct Authority.
We are entered on the Financial Services Register No. 627742 at www.register.fca.org.uk
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Derbymoneyman.com & Derbymoneyman are trading styles of UK Moneyman Limited, which is authorised and regulated by the Financial Conduct Authority.
UK Moneyman Limited is Registered in England, No. 6789312 | Registered Address: 10 Consort Court, Hull, HU9 1PU.
Authorised and Regulated by the Financial Conduct Authority.
We are entered on the Financial Services Register No. 627742 at www.register.fca.org.uk
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