Right away the answer is yes, you can get a mortgage if you are over 40 years old. But it depends on your circumstances.

If the mortgage term extends past your expected retirement age, then the lender may ask you to provide a projection of your pension income.

A recent study by the Nottingham Building Society has suggested that nearly half of the mortgage brokers they surveyed have experienced an increase in rejected mortgage applications from customers in their 40s. When they directly asked customers between the ages of 45 and 54 who had been turned away in the past two years, they once again said it was because of their age.

WHY IS THIS HAPPENING AND WHAT CAN BE DONE?

First, let’s turn the clock back a bit. Before the days of computerized credit scoring and levels of regulation that we see today. If you visited your local Mortgage Society looking for a mortgage, you will probably be interviewed by the Branch Manager or Mortgage Consultant. They would look at your personal circumstances, including how well you have managed your current account. Based on this, they would decide if your application was approved. If you are accepted, you will be told how much you can borrow, usually expressed as a multiple of your gross salary.

However, these multiples of earnings did not take age into account. So whether you were 30 or 50, you could borrow the same amount. Although this seems fair, if both applicants were to retire at age 65, it would have different effects on both individuals. Let’s look at an example using a £70,000 mortgage (principal and interest) using a notional interest rate of 5%

• 30 years – 35 year mortgage term – £252pm approx.

• 50 years – 15 year mortgage term – £395pm approx

In this example, we have two identical incomes with the same mortgage debt, but applicant two’s monthly payment is much higher. As a result, if mortgage rates spike, the risk of defaults and/or foreclosures is greater. This is why modern mortgage calculators consider the maximum term of the mortgage (ie, your age), as well as your income and expenses.

RETIREMENT AGE

Although we are constantly reminded that we will be working to a later age due to State Pensions, but the banks do not seem to be considering this when granting mortgages.

Lenders will consider making mortgages beyond retirement age, but only if you can show that you could still afford the payments after retirement. This can normally be evidenced by a letter from your Pension provider with a projection of your future income. However, this can cause a problem, as virtually everyone reading this is likely to experience a reduction in income upon retirement. Therefore, lenders will need you to show that you can still pay your mortgage with that reduced income. In practice, this almost never works unless you only require a very small mortgage, in which case you probably don’t need to stretch the mortgage past your retirement age anyway.

You may recall that the default retirement age was removed in 2011 and your employer can no longer force you to retire. As a result, fewer lenders are using the state retirement age as the age at which they must pay their mortgage, and more are allowing people to self-declare the age at which they intend to retire.

As far as things you may be doing if you find yourself in this position, you should be prepared to be asked how you will pay your mortgage in later years. Remember, regulations are in place to protect consumers and encourage prudent lending. If you need the mortgage term to exceed the state’s normal retirement age, you will need to show how you will keep the payments and provide proof if requested.

Please note that the above information is for reference purposes only and should not be viewed as personal financial or mortgage advice.