Approach Mortgages for Over-65s Positively
“Old age is always fifteen years older than I am” – Oliver Wendell Holmes
2 min read
Approach Mortgages for Over-65s Positively
“Old age is always fifteen years older than I am” – Oliver Wendell Holmes
2 min read
Are you over sixty-five and finding it challenging to get a mortgage? You’re certainly not alone, according to recent findings1.
Retirement Regrets
Thanks to reasons such as high property prices and rising student debt, many people are buying their first home much later in life. Increasing numbers also want mortgage terms that last longer than the traditional 25 years. When taken together, these trends mean that more people will be in their 60s, 70s or even 80s before repaying their mortgage.
With the number of people aged over 65 soon expected to surpass those aged 18 and under in some countries, just 37% of potential borrowers aged 65 and over are offered the size of loan requested, compared with 75% of younger borrowers; despite the average loan request being much lower for older borrowers.
Lenders are looking for evidence that you will be able to make the repayments for the entire term of your mortgage. It’s also important to be able to demonstrate that you’re a responsible borrower with a stable income.
How much can you borrow?
In order to find out how much you can borrow, it is important to understand how banks are computing how much they will lend you.
In Switzerland, banks currently use a theoretical interest rate as a reference (which changes but, for example, could be 5%). They are usually also accounting for a certain percentage of amortization per year. What’s more is that, depending on the bank, they will also take account of maintenance costs typically between 0.5% and 1%.
Having calculated the total costs of the house, it should be lower than 33% of your income. For example, if we use 6% as the figure mentioned above, this means 6% of the mortgage cannot exceed 33% of your income.
You need to take 6.2% of the value of the loan into account, not of the value of the house. In general, the mortgage will be 80% of the house value.
Depending on the bank, how they compute your income is a bit different. But in most cases, they will consider your previous year’s taxable income. There are, of course, some exceptions, though these will be based on individual circumstances and could impact what price range you can afford.
In the UK, mortgage lenders usually take into account the loan-to-income ratio (this is the amount you want to borrow divided by how much you earn) and your deposit. It is typical that the most you can borrow is capped at 5x your annual income (subject to status).
In addition, they need to know the monthly payment you can afford, after looking at your outgoings, debts and liabilities as well as your income. This is known as an affordability assessment.
Nowadays, mortage lenders also ‘stress test’ your ability to keep up with payments. This is to ensure you will still be able to afford the repayments if there are interest rate rises or lifestyle changes such as redundancy or having a child.
Depending on the result of this ‘stress test’, a mortage lender may limit how much you can borrow.
Whatever your age, we can help
Getting a mortgage as an older borrower is not mission impossible by any means. We are here to help.
Get in touch today and book your initial, free, no-obligation meeting. Send us an e-mail to info@pattersonmills.ch or call us direct at +41 21 801 36 84.
1MBT Affordability Index, 2022
