Ben Salisbury

Life begins at 40 - but not if you want a mortgage

Life begins at 40 - but not if you want a mortgage
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The good news is life begins at forty. The bad news is once you reach that milestone, you could struggle to get a mortgage. That's what many prospective home-buyers have reported, believing age was a factor in their failed mortgage applications. Here's why it has become an issue in recent years and what you can do about it.

Why banks are reluctant to give mortgages to the over 40s

According to research carried out by Nottingham Building Society, 25 per cent of those turned down for a mortgage said it was because they weren't allowed to borrow for a long enough period or that they or their partner were deemed too old. So why would banks be reluctant to turn away older borrowers? The problem arises because many mortgage lenders will only give a mortgage for a period up to someone's planned retirement date. With most loans set for a period of around 25-30 years, a 45-year-old borrower's mortgage term would take them up to the age of 70 or 75, well into their retirement.

Meanwhile, financial regulations state a lender must know a borrower is able to pay back a loan before lending the money. However, once a borrower reaches retirement age they may have a much lower income than before, making repayments more of a challenge. A further complication is that retirees can now take their pension in one lump sum. Who is to say there won't be some retirees who use that lump sum unwisely, leaving them unable to meet their mortgage repayments? The end result is a lender facing a considerable financial penalty for lending money to someone who can't pay it back. 

Financial age discrimination 

You may think that age discrimination is against the law, and you'd be right. Indeed, enhanced laws regarding all discrimination came into effect with the Equality Act 2010. But there are exceptions and the financial services industry has one such exemption which permits, in some cases, financial companies to legally discriminate against those of an older age when, for instance, it comes to giving mortgages. 

What to do if you're over 40 and want a mortgage 

There are some measures you can take such as reducing the mortgage term you're after, ideally so it runs out before you reach retirement. If you're faced with a lender who you feel is being ultra-strict then look for one who is prepared to listen to your individual circumstances. Otherwise, for a mortgage that extends into retirement, you will need sufficient proof that your income will be enough to meet repayments. If you think you are being unfairly discriminated against, you can always contact the Financial Ombudsman. It can also pay to get professional mortgage advice, which can show you the best approach for a mortgage when you're over 40.

It's a well-known fact that people are living and working longer than ever before. For all the potential problems, if you know you can pay off your mortgage (regardless of your age), then a lender somewhere should still be more than happy to grant that mortgage.

Ben Salisbury is Digital News Editor at WhatHouse?