You'd think that as you get older and (hopefully) wiser, your chances of getting approved for a mortgage would increase. But sadly, you'd be wrong.
As banks tighten their lending criteria, many 40-somethings are finding their applications declined. Why? Because despite the scrapping of the default retirement age, some banks are still acting as if every worker will stop work at 65.
In the bank's eyes, a mortgage applicant aged 45 would only be able to afford to repay the mortgage for 20 years, not the 25 years a mortgage is usually taken out for.
But in reality, many people have to buy homes later in life, to give them time to save up the substantial deposits now needed to buy a house. They're also working longer, either by choice or out of necessity, so the bank's refusal to give up its age-related lending criteria is closing the gap between the average age of a borrower, and the age at which they can no longer get a mortgage.
Age Discrimination
Despite this being blatant age discrimination, it's still legal; banks can refuse an application based purely on the applicant's age. And it's not just new mortgages; if a homeowner wants to release some equity by remortgaging their home, they may come up against the same barriers.
Of course mortgages can be taken out over shorter periods of time, in order to fit in with the bank's archaic view of the maximum 'safe' borrowing age, but this would mean the repayments would be much higher and all but the highest paid would be unable to afford them.
What Can You Do?
If you're over 40 and worried that you might not get approved for a 25 year mortgage based on your age, have a go on MoneySupermarket's mortgage calculator tool and see what the repayments would be like with shorter terms.
You may also be able to find a lender with less restrictive lending criteria; always shop around and compare as many mortgage deals as you can before committing.
One mortgage deal that is getting more and more popular is the offset mortgage. Offset mortgages are used by many to save money and pay off mortgage debt quicker than expected, but how do they work?
Offset mortgages
Put simply, you can use your savings to offset some of the interest that you have to pay on your home loan. For example, if you have £50,000 in savings that is linked to your offset mortgage of £150,000, then you only have to pay interest on £100,000.
Due to your interest payments being lower than what they should be, you are effectively overpaying your mortgage repayments, and as a result you will pay off your mortgage quicker. For example, if your mortgage is over a 25 year period then you could pay off your mortgage debt with years to spare, and you could save thousands of pounds in interest payments as a result.