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Do I have to repay my mortgage by a certain age?

21st September 2018

Key points:

Age is a factor when taking out a mortgage. Check the mortgage age limit when you apply. Speak to a mortgage broker. Some mortgages for older borrowers are only available through them and they will look at your finances to find you a suitable deal. Be sure to pick a mortgage that is right for your circumstances.

We have outlined the importance of planning for your retirement in other posts. The reason for this is obvious but overlooked: once you retire you are no longer in work, meaning that you no longer receive monthly payslips. Lenders recognise this and note that offering you a mortgage is riskier as you get older.

Lenders have to follow the Mortgage Market Review (MMR) rules, which mean they have to make sure you can keep up with repayments over the full term of the mortgage. Believe it or not they are not just being difficult. When you focus on this, the fact that most mortgage brokers require mortgages to be paid no later than retirement age is not so unreasonable. In fact – it is pretty sensible. For most people, the likelihood of being able to pay off mortgage debt is considerably less upon retirement than whilst in employment.

In response to the title question of this post, the answer is: usually yes. Normally the mortgage age limit at the end of the loan term is around 70 or your retirement age – whichever is sooner. There are exceptions but these are not guaranteed.

 

Age determines mortgage term

Most mortgage lenders have an upper mortgage age limit for their lending (for the same reasons discussed above). If you are approaching retirement, theoretically you have less time to put aside income to pay off your mortgage. Look for specialist mortgages offered by lenders aimed at older borrowers – you can usually find these by talking to a mortgage broker. Even if you are below the maximum age for a mortgage, its term is usually determined by your age when you open it. If you have not retired yet, you will need to prove your expected retirement income. Ask your pension provider to confirm your current pension pot value and your expected retirement date.

People typically see their income peak during their 50s. Often this is due to them being established homeowners with respectable deposits. This means mortgages for those over 50 are more likely to breeze through eligibility criteria and secure their pick of the best mortgage rates than other age groups. In your 50s you are likely to have plenty of choice over how to plan your mortgage and should still be able to apply for the standard 25 year mortgage term.

Retired or approaching retirement? Here are your mortgage options:

There are maximum ages at which you can take out a new mortgage. If you are approaching retirement age, consider extending the term of your current mortgage to post retirement. This should be possible provided you are able to provide evidence that your income or finances are sufficient to pay off your mortgage following your retirement. Of course, this is often easier to do if you are already retired as you can show how much money you receive each month.

There are also some options available for taking out a new mortgage that will not be paid off until after you have retired. In fact, older mortgage borrowers are in a better position than previously since banks loosened the purse strings on loans that stretch into old age. This is probably a good thing due to the fact people are living longer on average in the UK – hence the government cracking down on workplace pension schemes. What is more, research has shown that around a third of homeowners aged over 45 with a mortgage do not expect to pay it off before their retirement age.

If you are still feeling concerned about taking out a new mortgage or paying off your current one, IMC’s team of mortgage experts are here to help. Get in touch with your query or make an appointment to come in and see us at our London offices. With access to deals that are not available with high-street brokers, we aim to provide ideal solutions to all our clients.

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