We hear it all the time, the population is getting older.
People are leaving it longer to start a family and the average age of the entire planet is rising year on year.
But while this gives young adults more of an opportunity to enjoy life before settling down, when it comes to getting a mortgage, putting the decision off could have dire consequences. It can affect what you can afford to borrow and how long you will have to pay it back.
Banks Just Aren’t Keeping Up
While it is true that banks are not concerned about the age you are when you take up a mortgage, the age you will be when the mortgage is due to be repaid is a key factor in their lending decision.
Most traditional banks and mortgage providers have strict guidelines on the maximum age a mortgage holder can be when the mortgage is due to be repaid. Exceed the limit and there is no room for manoeuvre – and no chance of you getting a mortgage, especially at the right price.
This means anyone over the age of 40, who has no proof of retirement income, would be automatically rejected for a mortgage of 25 years or more, even if their ability to repay is solid.
And It Is Just Going to Get Worse
Over recent years there has been a phenomenal rise in the number of people rejected for mortgages purely based on their age.
Recent Government legislation has ruled that it is essential for all mortgage applicants to disclose their retirement income when applying for a mortgage. But the introduction of the MMR has meant that getting a mortgage is even harder. And the number of people who are rejected is just going to get worse.
Applicants now have to be able to demonstrate affordability for their mortgage at a much more detailed level. They have to take into consideration every element of their daily expenditure, now and in the future, even down to the number of takeaways they buy.
And as the age of the average mortgage holder rises, this is a problem that many more are going to face.
Financial experts have forecast that by the year 2025, the average age of the first time buyer will exceed 40 years for the first time.
But if that means the standard mortgage applicant will reach state pension age before their mortgage is due to repaid, how on earth are they ever going to be able to find a realistically priced mortgage in the first place?
How to Overcome the Age Issue
Ultimately, the best way to get the cheapest mortgage, no matter how old you are, is to repay the debt as quickly as possible. So always try and opt for a shorter term loan whenever possible.
A shorter time span not only protects you against the age trap that many applicants are falling into, but it also minimises the amount of interest you have to repay overall, reducing the total cost of the debt.
Talk to an IFA about flexible mortgages as some institutions have a more open-minded approach when it comes to the age of mortgage customers.
Though some providers will simply refuse an applicant who is too old, others will charge a premium price for such a service. So look to the mortgage providers who are more realistic when it comes to their age profiles and discover which lenders to avoid if you want to keep the cost of your mortgage low.
Like so many other issues facing the financial world at present, this is a problem that can quite easily be overcome with the right advice. Customers can then show their intolerance to such prejudice with their feet, forcing traditional financial institutions to stand up, take notice and keep their financial products up with the times.