Our guide to mortgage age limits

Sep 21, 2020
A Guide to Mortgage Age Limits UK

If you’re an older borrower, you may feel apprehensive about taking out a new mortgage. Whether you’re still working or are interested in a mortgage in retirement, we’re here to help you make sense of what’s available.From the maximum age for a mortgage to specific retirement mortgages which are interest-only, we’ll try to answer any questions you may have. And once you’ve found the right mortgage for you, you can discover your perfect David Wilson home below.

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Why take out a mortgage at an older age?

There are many reasons people consider a new mortgage later in life or in retirement. Perhaps your current home no longer suits your needs and you wish to downsize or move closer to family and friends.

You may be interested in remortgaging instead. This could happen if your current mortgage is nearing completion and you’d prefer to stay where you are rather than move somewhere new. Or you may want to release equity from your property in order to buy a second home, fund your retirement, or help a younger family member get on the housing ladder.

Why is it harder for older borrowers?

With mortgage applications, banks and lenders evaluate each customer based on their individual risk. Risk means the likelihood of being able to pay back the mortgage, and the property price not losing its value.

There is no standard mortgage age limit, but it can be harder to be approved for a mortgage as you get older as:

  • You’re more likely to enter retirement before you’ve paid off your mortgage
  • Once you retire, you no longer have a regular salary and your income may go down
  • Lenders must evaluate your risk based on your pension or investments
  • Your mortgage risk, therefore, increases with age
  • This can make the terms of your mortgage less favourable than for someone of a younger age

What is the maximum age for a mortgage?

Each lender usually has their own mortgage age limit. The maximum age you can take out a mortgage is between 65 to 80 years old, on average.[1] The average maximum age a mortgage must be paid off is between 70 to 85 years old.[1]

If you have a strong credit history, a large pension, or evidence of strong return on investments in shares or properties, you could have a better chance of securing a mortgage.

What is an interest-only retirement mortgage?

Retirement mortgages are a relatively new product in the UK, [2] but tend to suit older borrowers more than other types of mortgages. In principle, they are similar to interest-only mortgages, although the most common type of mortgage is a repayment mortgage.[3]

There are several key differences between repayment, interest-only, and retirement mortgages.

  Repayment Mortgage Interest-only mortgage Retirement mortgage
(Interest only)
Monthly payment A % of the mortgage loan and % of the interest A % of the interest A % of the interest
At end of mortgage term Entire loan and interest has been paid off   Entire mortgage loan must be paid in full No fixed term, but the entire mortgage loan must be paid in full once you sell, move into residential care, or at end of life

There are some benefits to choosing a specialist interest-only retirement mortgage:

  • You only need to prove you can afford the interest repayments, not prove your income
  • The loan term isn’t fixed (but you must pay off the mortgage in full once you sell, move into residential care, or at end of life)
  • Some retirement mortgages allow you to pay off part of the loan as well, which will reduce the size of your final loan repayment over time

All mortgages come with risk however, and you should speak with a financial adviser to find out which is best for you.

How can I get a mortgage?

When choosing a mortgage at any age, it’s important to do your research.

  • Use a mortgage retirement calculator to assess how much you can borrow
  • Use online comparison tools to see the strengths and weaknesses of different mortgages
  • Speak with a mortgage broker – they often get access to more competitive rates
  • Look into specialist mortgages for older borrowers (such as interest-only retirement mortgages)
  • Consider a mortgage from a challenger bank or building society, as they often have favourable mortgage rates for older ages[4]
  • View our offers including the Own New - Rate Reducer a brand-new scheme available on new build homes that could mean lower mortgage rates and reduced monthly payments.

Our spacious David Wilson homes are well suited for your next stage in life.
Take a look around some of our available new homes here.