Am I too Old to Take out a Mortgage?

Owning our own home can be a dream for many people but as we get older we may worry that it will be too late. As a mortgage is repaid over an average of 25 years, then you will need plenty of time to repay it and banks may look unfavourably at anyone who is close to retirement age and wanting a mortgage. However, it is not worth giving up. While it is better to take one out when you are young, there are still options for those that are older.

Get in early enough
The state pension age in the UK is generally when people retire. It is changing though. It used to be 65 for men and 60 for women but now it is 67 for both and is likely to go up. This means that if you want to repay your mortgage before you retire, you may have a few more years than you think. If you are considering a 25 year mortgage then your cut off will currently be your 42nd birthday but you may find that there are other options available. Some lenders will lend to people until they are 70 or 85 though, but this will very much depend on the lender. There are also rules that mortgage lenders have to follow and one of them is that they have to check that you will have a high enough income to cover the mortgage repayments.

Have a good retirement income
If you know that you will have a good retirement income, usually due to having a good pension, then lenders may be happy to allow you to have a mortgage where repayments go beyond retirement. This will very much depend on the lender though and you will have to do research to find out whether any are prepared to lend to you. This might be helped if the mortgage is in joint names and only one named person retires before the mortgage term is up. It can sometimes be easier to prove to a lender that your income is high enough to cover mortgage repayments if you have already retired. This is because pensions are not guaranteed and the amount that you will get is a projection rather than a fact. The income you get depends very much on how well your money is invested while you are contributing to the pension scheme and what pension you manage to buy with the money once you retire. If you have income form other sources, such as from shares, property or other investments then this will go in your favour too.

Save a bigger deposit
It will probably be wise to try to save up a bigger deposit towards the mortgages than the minimum required. This will show that you can be trusted with money and will mean that you will not need to borrow so much money. You then may be able to afford to have a shorter term for the mortgage and therefore have it all repaid before you retire. This will take time of course, but older people may have less financial burdens, perhaps if their children are working and no longer dependent on them, for example. They may also be being paid more due to having more experience. Being self-disciplined enough to make the necessary savings is not necessarily something that gets easier with age though. It can be easier to set up a direct debit to pay a sum of money into a savings account each month, just after payday so that you are putting aside something before you can spend it. By doing this and adding in any money you have left at the end of the month you will be able to build up a decent deposit. You might also want to find other ways of raising extra money, such as selling things you own and no longer need, taking on extra work or working more hours in your job.

You may feel that saving for a deposit will take time and you will be even older when you apply and less likely to get accepted.  Although you will be older if you can save quickly enough, you should be able to outweigh your increase in age with being able to put more money towards the property.

So as you can see, there are some barriers with regards to age when looking for a mortgage and these may also apply when remortgaging. However, there are things that you can do which will make it easier for you to take one out. It is wise to start as early as you can when getting a mortgage though as you will be more likely to have your application accepted. You will need to make sure that you can prove you will have a good retirement income if the mortgage term goes beyond your retirement age. You may also need to build up a good deposit.

What is the Difference Between APR and Monthly Interest Rate?

There is often a lot of confusion with interest rates or people think they know what rates mean but actually may not be correct. It is not surprising that we get confused though as lenders may try to confuse us so that the rates look more attractive than they actually are.

What is APR
APR stands for annual percentage rate and can be used to find out exactly what you will pay when borrowing. This is because it takes many things into account and not just interest. This can be confusing but it is an equivalent figure so it include the interest rate, any initial fees, loan costs and will take into account hen the interest is charged, as that could be yearly, monthly or even daily. Calculating this yourself could be tricky but as all lenders legally have to calculate it in the same way, then it is an easy way to compare products. You can get an example of how this information is presented by checking out the representative example on for example.

There will be some charges that are not included in the APR, which could be because they are optional – so things PPI (Payment protection insurance) may be charged on a product but not included in the APR calculation. So it could be best when you are comparing loans to ask the lender if the APR includes all charges.

What is interest rate
The interest rate is the amount of interest that you will be charged on what you borrow. Some lenders will calculate it daily, others monthly, yearly or any time they see relevant. This means that comparing them can be tricky. As if you are charged per day and you are continuously repaying some of the loan, then you will only be paying for what you owe on that day. However, if it is charged yearly and you are repaying a bit each day, then the amount you get charged interest on at the end of the year will be a lot less. For example, if you owe £1000 and are charged interest on the last day of the year and repay £1 a day, then when you do get charged interest it will be on £1000-£364. However, if you get charged daily then you will get charged interest on £1000 on the first day and £999 the second day and £998 the third day and so on. This means that you will end up paying more interest compared with the first example. However, if you get charged your yearly interest on the first day of the year you will be paying it on £1000 and so it will be more expensive than the second example. So you can see why it can get really complicated and just having a interest rate percentage is not really that helpful.

Which to take notice of
Therefore it is best to look at the APR to find out exactly what you will be paying and this will allow you to compare loans like for like. You will be able to see, at a glance, which will be more expensive for you. Then if cost is the only important factor in choosing a loan, you will immediately be able to see which will be the best for you to go for. However, cost is not necessarily the only thing you should be considering.

It can also be useful, for example, to find out what you will be repaying each month and compare that as well. Although this may vary a lot between loans, because they may have different expectations with regards to how long you have for repaying the loan, it will allow you to see how much you will need to make available each month. You may find that the cheaper loan has to be repaid more quickly and you cannot afford those repayments. It is worth checking to see as this could potentially cause big problems for you otherwise.

You may also want to consider other things such as the reputation of the company and whether you feel their customer services will be good. It may be that you will need to contact them or need them to help you and you will want to be sure that they will treat you fairly and efficiently.

So, if you want to find the cheapest loan then you will need to look for the one with the lowest APR. However, you will need to consider whether this is the most important thing to you as it could mean that you will end up using a lender that is not good to its customers, has a poor reputation and expects you to make very high monthly payments. This may not matter to you as long as you get a cheap loan, but others may be concerned about this and might want to consider their alternative options carefully. They might be prepared to pay just a little bit more if they can get smaller repayments or use a lender that they trust.