How are different countries treating mortgages for over 60s?
Simon Conn is an overseas property professional
With the current economic turmoil due to both Brexit and Covid-19, many UK mortgage brokers have continued to be accused of being ‘ageist’. This is because many are lowering their maximum age limits on traditional mortgage lending for an older borrower from 80/85 to an upper age limit of 70 years.
Since the last recession over 10 years ago, banks still have less money to lend and have put in place strict lending criteria (and recent events have not helped), which has resulted in some older people over the age of 70, being refused a regular mortgage. Many critics believe that this is just another continual 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 having a severe impact on people much younger. Many people in their fifties, who are looking to re-mortgage their house are also discovering that due to the age limits, they will have to make much higher repayments over a shorter period which could make the repayments on their mortgage unaffordable.
When it comes to purchasing a property and applying for a mortgage, Simon Conn, overseas mortgage expert with 35 years’ experience in the financial services industry, has shared his comparison for how the over 60s are currently treated in popular overseas destinations including Spain, USA, France, Switzerland, and Turkey.
In France, 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 considered and can possibly include 100% of an applicant’s pension income, 75% of the rental income and some banks and building societies 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 of 55 at the time of application, some lenders will only take 70%-75% of employed income into account.
The maximum mortgage age is 75 years in Spain and similarly to the UK, there is an age restriction in place with lenders not usually considering an 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 which may affect your lifetime mortgage.
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.
For a main residence in Switzerland, in principle there is no age limit for obtaining a mortgage loan, but at the age of 80 the loan should not exceed 50% of the initial loan basis.
For a secondary residence, the maximum credit is generally granted up to 60/65% for the over 60s, unless combined with a portfolio management.
All regular incomes are considered including investment income but at a reduced rate depending on the quality of assets (price and dividend volatility).
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 for Turkey is 15 years which is noticeably lower than the other countries. 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.
Unlike many other countries, there is normally no age limit 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 many loan programmes they have a three-year penalty, but you can pay up to 20% per annum off every year. After the three years, there is no penalty.
Additionally, it is worth noting that if a mortgage is required as part of a larger private banking transaction – such as over £1m – then the above lending criteria could become less applicable and the eventual loan would be underwritten and assessed on a case by case basis.