Whether you’re buying your first home or searching for a new deal, there are some factors you might want to keep in mind when taking out a midlife mortgage that could affect your decisions.
1. Your age might affect the mortgage term you can select
As house prices have increased, there are mortgages available with long terms, so you can repay over 40 years. This could be useful if you want to reduce your repayments.
However, if you’re taking out a mortgage in your 40s or 50s, a lender might not approve your application for a lengthy mortgage term. Most providers will want the mortgage term to end before you reach a certain age limit, usually 70 or 75.
If you want a mortgage that extends past this age, you might benefit from reviewing the criteria of different lenders before you apply.
2. The affordability test may consider your retirement income
Lenders assess your ability to meet mortgage repayments now and in the future. This often involves checking if you could meet your financial commitments if interest rates increased.
When applying for a mortgage in your middle years, a lender might also ask you about your retirement plans. If you hope to step back from work during the mortgage term, they’ll check that you’ll have the income to continue meeting repayments. This might come from your pension or other assets you’ll use to fund retirement.
It is possible to take out a mortgage that extends into retirement.
Again, you might benefit from understanding each lender’s criteria before you apply.
3. It is possible to choose an interest-only mortgage
If you want to reduce your mortgage outgoings or a repayment mortgage isn’t right for you, you can choose an interest-only mortgage, including options that could continue into retirement.
As you’ll only be paying the accrued interest each month, the outstanding balance won’t reduce. So, at the end of the term, you’ll still owe the initial amount you borrowed.
When taking out an interest-only mortgage, it’s a good idea to consider how you’ll manage the commitment in the long term. For example, do you intend to use other assets to pay off the debt, or will you downsize in the future? If you plan to pay an interest-only mortgage into retirement, will your income continue to cover the outgoings when you stop working?
4. Overpaying could help you pay off your mortgage more quickly
Many people want to pay off their mortgage as quickly as possible. Doing so could enable you to retire earlier or boost your disposable income.
Making overpayments could be one way of clearing the debt more quickly, without committing to making the additional payment every month. So, if you needed to use the money to cover expenses one month, you could halt the payment.
If your goal is to pay off your mortgage by a certain milestone or simply as quickly as possible, opt for a mortgage that wouldn’t apply an early repayment charge for doing so.
Usually, you can overpay your mortgage by up to 10% of the outstanding balance each year, either through regular payments or a lump sum, without facing an early repayment charge.
5. Your credit report matters
Even if you already have a mortgage, your credit report still matters.
Your credit report is one of the tools lenders will use to assess how likely you are to default on your mortgage repayments. The information in the report could affect whether your application is approved and the interest rate you’re offered.
If you haven’t reviewed your report recently, taking a few minutes to ensure the details are correct could be worthwhile. A low credit score or negative factors on your credit report don’t automatically mean you can’t take out a mortgage, but highlighting potential issues early could mean you approach lenders who are more likely to approve your application.
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Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
