How To Get a Mortgage if You’re Over 40

Specialist Mortgage Advice in Leicester

Keep in mind that the information detailed below is intended solely for reference purposes and should not be taken as any type of personal, financial or mortgage advice in Leicester.

Can I get a mortgage at 40?

The simple answer to this question is yes, there is a chance that you could get a mortgage if you are aged 40+. This does come down to your situation though.

An old survey carried out on mortgage brokers by the Nottingham Building Society found that the large selection surveyed had mentioned that they have seen an increase in mortgage applications being turned down for customers that were within this age bracket.

Furthermore, they spoke directly to these customers who were between the ages of 45 & 54 and were declined during the time period this survey was being carried out, they found that the biggest factor of this was their age.

In the article, we will look into why we feel home buyers are going through this, and the best steps you might be able to take if you would like to take out a mortgage over the age of 40.

Why are over 40s having mortgage applications denied?

To get into more depth into the position mortgage application are in, it’s key that we look back at the previous years, rewinding back before the introduction of computerised credit scoring and increase industry regulation.

In the case where you were to go and speak to someone at your local building society, looking to get a mortgage, it’s likely that you will be interviewed by the building society branch manager or one of their own in-house Mortgage Advisors in Leicester.

From this, they will have a look into all of the personal information you have provided and will see how well you manage your finances in your current account before making a decision on if you are mortgage application should be approved.

If you were lucky to be approved, you will then be able to have insight into what earners in a similar situation to you were able to borrow for a mortgage. You would be provided with this information through a multiple of your gross annual salary.

Let’s have a look at an example. If you were earning a figure of approximately £20,000 per annum and the mortgage lender’s income multiple was 3.5x, this will result in you getting a mortgage of around £70,000.

When it comes to this income multiplier, it’s best to keep in mind that it doesn’t factor in your age. Due to this, it doesn’t matter what your age actually was so whether you were 30,40 or 50, you would usually be able to borrow the same amount on a mortgage.

This seems to be quite fair actually, no signs of ageism.

On the surface, this looks to be a fair approach, however, you need to look further. In the situation where two mortgage applicants were both looking to retire at the age of 65, then one of these applicants might have a term upwards of 35 years, whereas the other may only have a 15-year term. This would result in higher monthly payments.

Utilising the previous example of a £70,000 (capital and interest) mortgage, with a national interest of 5%, it could look like this:

• Applicant one mortgage payments on £70,000 over 35 years: £252pm approx. 
• Applicant two mortgage payments of £70,000 over 15 years: £395pm approx. 

With this example, we have two earners that are more or less identical, with the same amount of mortgage debt, however, applicant two has a lot higher monthly mortgage payments than the other applicant.

In the event that the national interest rates drastically rose up, this would cause a much higher risk of arrears happening for an applicant with higher monthly payments. Overall, reducing the risk if the main aim in all this.

You will find that modern mortgage calculators usually factor in the maximum length you could take a mortgage term for (which is your age), along with your income and your expenditure.

Our Thoughts

Here at Leicestermoneyman, we have had the BBC get in touch with our very own ‘Moneyman’ Malcolm Davidson to get his thoughts on the Nottingham Building Society study. His opinion was not the fact that older customers are being declined, but they are restricted in the amount they can borrow and were hoping to borrow more.

The ironic point in this situation is that we are constantly reminded by our own government that we will need to work until a later age, so they can raise the retirement age for us to be able to qualify for our state pension.

It’s unfortunate that the high street lenders don’t keep this in mind when it comes to granting customers their mortgages. Let’s look further into this.

Why It’s Hard to Get A Mortgage Over 40 Years Old

First of all, there are a variety of industries in the country that involve manual labour. Generally, people who work in this type of industry will not be still working there into their seventies or beyond.

On top of this, mortgage lenders want to reduce the risk of any repossessions and arrears, as these look bad. Furthermore, the process of taking a property into possession is costly and can put a bad reputation for these mortgage lenders.

In terms of a mortgage for much older mortgage applicants, they don’t want to have to push a pensioner out of their own home due to not being able to afford their mortgage anymore.

The good news is that many mortgage lenders out there have begun to look at granting mortgages to applicants above the typical retirement age, however, the applicant will need to show that they can afford this mortgage post-retirement.

To do this, you would normally give your mortgage lender a letter from your pension provider that would evidence of what your future income is going to be. The issue with this is that even with this, your income will usually be lower at the time of retirement than it used to be.

This indicates that when you are looking at whether you can afford a mortgage or not, a mortgage lender would require you to prove that you are able to do so, even with a reduced income when you retire and beyond.

This may sound great in theory, but this doesn’t always work the best in practice. The only case it does if you are only looking to take out a smaller mortgage, at which point you probably don’t need to take out a mortgage beyond this point.

In 2011, they got rid of the default retirement age and put a rule in place that states that your employer can’t force you to retire if you do not want to.

As a result of this, there will be a number of mortgage lenders who use the state retirement age to get an estimate of when your mortgage should be repaid in full. We do find, as a Mortgage Broker in Leicester, that it’s becoming popular for customers to be allowed to self-declare their retirement age.

Customers who have a very physical job like a firefighter, or a mortgage lenders will take a plausible approach to this. For example, a customer in this type of job is aiming to retire at 72, this wouldn’t be the best or very realistic.

With The Help of a Mortgage Broker

In the past, one of our expert Mortgage Advisors in Leicester had a case where a mortgage lender agreed to make a 9-year mortgage for a 66-year old accountant who was looking to retire at the age of 75.

Obviously, this is a case that is quite out there and won’t be the case for most people, therefore, it’s no guaranteed that the same outcome will happen to you. On the other hand, this just shows how flexible some lenders can be. The main thing you should do is prove how you are able to afford a mortgage at retirement.

Nowadays, consumer protections and regulations are in place in order to protect and encourage careful lending.

Furthermore, there are also lots of different paths as you get older that allows you to protect yourself and your home. These include equity release in Leicester through taking out a lifetime mortgage, or alternatively, you can look into a retirement interest only or maybe a term interest only.

An expert and qualified Mortgage Advisor in Leicester will be able to take a look at your situation. If you are towards the qualifying ages for these mortgage types and would like to proceed, your dedicated advisor will look at your situation and start a conversation with you and your family as well as look at alternative options.

Whether you’re a first time buyer in Leicester or are thinking of moving home in Leicester, our team are available 7 days a week to book you in for a free mortgage appointment or we book online to connect you with an advisor.

To understand the features and risks of equity release in Newcastle, lifetime mortgages and later life lending, ask for a personalised illustration.

A lifetime mortgage in Newcastle may impact the value of your estate and it could affect your entitlement to current and future means tested benefits. The loan plus accrued interest will repayable upon death or moving into long term care.

02/11/2022