The rise in house prices has made it difficult for people to buy their first home resulting in the average age of a first time buyer rise to 30 and a home mover to 39 years of age.
Changes in regulations after the financial crisis has placed more emphasis on lenders to check affordability of borrowers when they apply for a mortgage and their ability to pay back the loan at an age limit, making it harder to borrow after retirement.
Many homeowners at the end of their mortgage term must either pay back the loan as a lump sum or sell their property and downsize, however, it is possible to re-mortgage to a new lender or consider equity release.
There are now more lenders willing to extending the age limits beyond normal retirement age of 65 and equity release plans that do not require you pay back either the interest or the loan during your lifetime allowing you to stay in your home.
With independent advice from London City Mortgages we can help you find the mortgage to allow you to remain in your home. We can help you find the best remortgage deal or for older homeowners use equity release and make the online application process easy for you.
Age limits from lenders
The age limit set by a lenders means you must pay back your mortgage by a certain age, such as age 75. The shorter the number of years to this limit the higher will be the monthly payment and if you are in retirement this may be more than you can afford.
Here is an example if your property is worth £300,000, your mortgage is £100,000 and you re-mortgage with a preferential rate of 1.49% fixed for two years which must be repaid by age 75.
If you are currently aged 55 the term is twenty years and your monthly payments are £482 per month, however, if you are aged 65 the term is only ten years with payments almost twice as much at £897 per month.
Due to changing demographics with people working longer many have no set retirement age and want to continue to pay their mortgage until they are older.
Lenders are raising their upper age limits for first time buyers, home movers and remortgage buyers and there are a number of building societies that have no age limits.
| Building societies with no age limits |
|
|---|---|
| Bath | Buckinghamshire |
| Cambridge | Holmesdale |
| Loughborough | Monmouthshire |
| National Counties | Saffron |
Many lenders now realise a need for change and large banks and building Societies are raising the age limits although there remains the requirement for borrowers to demonstrate affordability for the mortgage.
Lenders increasing age limits
Rising house prices mean first time buyers, home movers and re-mortgage buyers are now much older and have larger mortgage debts to repay which may not be possible before the traditional retirement age of 65 years.
A report from the Building Societies Association (BSA) shows the UK has 11.6 million people over the age of 65, which could rise to 16 million in the next twenty years.
Since the Mortgage Market Review (MMR) in 2014 banks and building societies have been required to have stricter lending requirements in terms of affordability and how the mortgage is repaid.
As a result this approach reduced the willingness to lend to older homeowners such as remortgage buyers and home movers.
According to the BSA there are 33 societies who have chosen to increase their upper lending age limit to 80, 85 and here as some examples:
| Lender |
Maximum lending age |
|---|---|
| Natinowide | 85 |
| Marsden | 85 |
| Leeds | 80 |
| Furness | 80 |
| Halifax | 80 |
| Santander | 75 |
| Virgin Money | 75 |
| Lloyds | 75 |
| Clydesdale | 75 |
| RBS | 70 |
| Barclays | 70 |
There may be further restrictions for older borrowers such as the loan limited to £150,000 for new borrowing and a maximum 60% loan to value (LTV).
Your home and equity release
Equity release is offered from age 55 although the amount you can borrow increases from 31% with the youngest ages to about 63% for those aged 80.
This approach is popular if you have already paid off your mortgage, are retired and perhaps your income no longer stretches as far so extra income or capital sums would be useful for maintaining your standard of living.
It can be used if you need to repay your mortgage, are unlikely to meet the lenders affordability tests and do not want to make any monthly interest payments.
The main reasons people consider equity release and the percentage of those asked that agreed this is what they would use the money for are as follows:
| Agreed |
Main reason for equity release |
|---|---|
| 63% | Home and garden improvements |
| 31% | Holiday of a lifetime |
| 30% | Pay off debts or personal loans |
| 23% | Help family members |
| 22% | Pay off interest only mortgages |
| 16% | Meet everyday expenses |
Equity release products, also called a lifetime mortgage, do not require any proof of income and you can either pay interest as you go along or roll up the interest for your lifetime.
The benefit of these plans is that you can live in your home for your lifetime or until you move to a residential care home at which point the property will be sold and the loan repaid.
Interest rates are higher than a conventional mortgage with the lowest interest rates from 3.0% variable and fixed rate from 3.79%.
As an example, if you released £100,000 using equity release at a fixed rate of 4.46% the amount you would owe in ten years would increase to £156,000 and by year 15 this would be £195,000.
Unlike a residential mortgage, if you have any medical conditions these can be taken account and allow you to take a higher loan as a proportion to property value.
If you do not need to take the maximum allowable loan using equity release it is possible to agree the initial advance and take a drawdown for the amount you want leaving you the opportunity to take further amounts when needed, helping you to reduce the interest costs over time.
