Is It Too Late For You To Get A Mortgage?
There is no ideal age to get a mortgage. Everyone has to choose what is best for them in accordance with the lifestyle choices that they have made and their financial situation. If you spent your twenties traveling the world earning just enough to live on as you went, this was clearly not the right time for you to get a mortgage! However, if you were settled into a job by the time you were 25 then it may have been a prudent investment.
So, what happens if you hit midlife (or beyond) and you have no mortgage? Have you missed the boat? Is it a sound financial move to get a mortgage late in life? Could you even get a mortgage if you wanted to? Perhaps there are age limits to mortgages that you were not aware of.
Borrowing money later in life
Historically, lenders have been reluctant to lend money to older borrowers. This may seem surprising. Life expectancy in the USA has been steadily rising for many years. People are retiring later on in life and are enjoying good health in old age. Yet, lenders are only just beginning to catch up and the mortgage products available to older lenders are finally more varied.
Longer age limits are being allowed for older customers which effectively reduce the monthly premiums and makes the products more affordable for them. It is now possible for prospective borrowers who are in midlife to use the FHA mortgage calculator to find out how much they can borrow and what their monthly repayments will be. This program has been pushed into the spotlight and now accounts for over 40% of all residential mortgage originations.
It is still a personal decision. You can choose if the repayments will suit you but your age is now less likely to be a barrier than it once was. Naturally, there are many factors that you need to take into consideration before you make this big decision. Your ability to pay is the biggest consideration and this requires you to take a long, hard look at your financial situation. When you are older, you may need to check out your pension funds to prove that you have enough pension to afford the repayments. The lender may put a limit on how much you can borrow. You may be required to prove that the loan will be no more than 60% of the value of the property that you are trying to purchase.
You will need to look into the future because you don’t want to accumulate debts that your family will have to pay off. So long as the value of your property is enough to pay off the balance of your mortgage you will be fine and your children’s finances will not be affected. The worst-case scenario is that they will have to sell the property after your death to pay off the debt. You also need to remember that the houses take some time to sell and that the mortgage payments must be maintained whilst it is on the market. This is something that you may wish to discuss with your children if they are old enough.
However, you need to bear in mind that house prices can go up as well as down so you may want to be careful about the area where you are buying and the type of property that you purchase. Some parts of the property market are more volatile than others and it may be best to avoid the more risky options.
Why getting a mortgage later in life may be a good thing
Allowing older people to get a mortgage to buy a home is a good thing for them and may be a good thing for the housing market and the wider economy as a whole.
Perceptions and attitudes towards older people are changing. Thankfully, the image of old age is getting more positive and changes in the housing market can be used to re-enforce this positivity. Many people in their fifties sixties are still looking forward to challenges and are making life changing decisions. If they are allowed to access new types of lending, it widens their opportunities.
There are potential benefits for the housing market. Some older people are stuck in larger properties because they cannot access the funds to allow them to buy more suitable accommodation. This acts as a block at the top end of the housing market and prevents younger families from being able to access these properties. Increased options on lending could remove this block and get the supply of houses flowing again.
People sometimes assume that downsizing is all about moving to a cheaper house but that is not strictly true. A retired couple may want to sell their huge house in the country and move to a plush penthouse apartment that costs the same or more. For this, they need to be able to access a mortgage product that suits them.
In terms of property, everything is starting at a later age. People are settling down and starting families later in life. They are moving out of their parent’s homes later in life and they are purchasing their first property later in life. If you buy your very first home when you are in your thirties or forties then you will be looking to scale up in your fifties. By denying this generation a mortgage at that age you are denying them the opportunity to live in the dream family home that they may have aspired to since they were teenagers.
Family structures are very different to how they were a few decades ago. The divorce rate among those in their fifties is increasing. This means that many midlifers are starting again, either as a single person or with a new partner. The relaxation of the mortgage age criteria means those faced with starting fresh, can include a new home of their own in their plans for a new life.