In recent months many of the UK mortgage lenders have been accused of being ‘ageist’ after decreasing their maximum age limits on lending from 80 or 85 to just 70 years.
Since the recession banks have had less money to lend and have put in place strict lending criteria, which has resulted in some people over the age of 70 being refused a mortgage. Many critics believe that this is just another sign that banks only want to concentrate on helping young buyers to get on to the property ladder.
Although these age restrictions normally apply to those aged 70 and above, they are actually having a severe impact on people much younger. Many people in their fifties, who are looking to remortgage their house, are also discovering that due to the age cap, they will have to make much higher repayments over a shorter period of time, which could make the mortgage repayments unaffordable.
Due to the recent media attention surrounding this issue, I thought it would be interesting to compare how people over 60 are treated in other popular overseas destinations (such as Spain, USA, France, Switzerland and Turkey), when it comes to purchasing a property and applying for a mortgage.
The maximum mortgage term is 75 years in Spain and similarly to the UK, there is an age cap in place with lenders not usually considering any applicant that is over the age of 70.
This could become complicated where there are joint applicants, where one applicant is much younger than the other.
Applicants over the age of 65 could also expect a much lower loan to value percentage and if life insurance is compulsory it could become expensive.
Pension income (after tax) may be acceptable in some cases.
Unlike many other countries, there is normally no age cap on a mortgage in the US and the maximum mortgage term is 30 years.
Mortgages in the US are also different in the sense that they are underwritten on any taxable income and assets at the time of application. This means that if the applicant can currently afford the repayments, they could be granted a mortgage for up to a 30 year term.
In the majority of cases, there are no early redemption penalties, so a mortgage can be cleared at any time during the term agreement. For example, when the borrower receives a lump sum from a pension or investment etc.
France & Switzerland
In France & Switzerland the age cap is 80 and lenders base the mortgage agreement on the age of the oldest borrower. There is also a minimum mortgage term of five years.
Various incomes are taken in to account and can possible include 100% of an applicant’s pension income, 75% of the rental income and some banks also take 50% of the investment income.
If the applicant is employed and their employer confirms a higher retirement age, which is different to the state age, then some banks will consider this. However, if they are over the age 55 at the time of application, some lenders will only take 70%-75% of employed income into account.
Turkish banks will normally allow a mortgage to be repaid up until the 75th birthday of the oldest applicant, but for every year the applicant is over the age of 60, the income used in the debt to income (DTI) calculation could be reduced accordingly by a lender’s set scale, thereby reducing the maximum mortgage available.
The maximum mortgage term is noticeably lower than the other countries mentioned above (ie: 20 years) but banks could consider provable pension income. Proof of projected retirement income is also a requirement for applicants 57 and over, if they require the mortgage to continue past normal retirement age.
It is also separately worth noting that if a mortgage is required as part of a larger private banking transaction – ie: over £ 1 million – then the above lending criteria could be become less applicable and the eventual loan would be underwritten and assessed on a case by case basis.