Traditionally borrowing gets harder as you get older, but it is getting easier to secure a buy-to-let mortgage when you’re over 60.
Legally there is no maximum age limit for applying for a mortgage, but in the past, there has been a reluctance to lend to older borrowers. However, as the retirement age creeps towards 70 – for both men and women to 66 in October 2020 and 67 between 2026 and 2028 – lenders are being forced to recognise that people will be working for longer and borrowing later in life.
Not only are people retiring later, but since the new pension rules were introduced, they also have more flexibility over what they can do with their retirement savings. Lenders have begun to recognise that buy-to-let is an attractive proposition for older borrowers looking to maximise their savings and investments.
Buy-to-let age limits vary
Borrower age limits do still exist, ultimately because older borrowers are still considered a greater risk for lenders. Historically, borrowers in their early 60s would find it easier to secure a buy-to-let mortgage than a borrower in their 70s, but today’s market does seem to be more accommodating to older borrowers.
For example, The Mortgage Works (part of Nationwide Building Society) buy-to-let range is available to borrowers up to 70 years of age at the time of application, and both Virgin Money and Santander have increased the maximum age permitted at the end of the mortgage term by 10 years to a borrower’s 85th birthday in the past year.
According to Moneyfacts, a fifth of buy-to-let deals on the market have no maximum age, and almost two-thirds have a maximum age at the end of the term of 85 years or more.
Rental cover is more important than age
Age limits might still be a factor, but when it comes to determining whether a buy-to-let investment is affordable or not, many lenders will focus more on the rental cover than the age of the borrower. As long as borrowers can demonstrate that the monthly rent payable on the property is enough to cover mortgage repayments by between 125% and 145%, the investment will be determined as affordable.
As borrowers work and live for longer, borrowing and investing into retirement will become more commonplace. There are already plenty of choices available for older buy-to-let borrowers, and this market niche is set to grow as demand increases.