New mortgage lets you borrow up until 95

This new mortgage lets you borrow up until the age of 95- are we seeing a major shift in the market?

Good news for older borrowers: you can now get a mortgage up until the age of 95.

Following a pledge from building societies last November to review maximum age limits for borrowers, the market is really making a move.

Hodge Lifetime is trialling a 55+ mortgage specifically designed for older borrowers. At the moment it’s only available through selected mortgage brokers but it’ll be rolled out this summer.

Here’s what you need to know.

Compare mortgages with loveMONEY

How it works

The HL 55+ loan is an interest-only residential mortgage. You’ll need to pay interest on the loan each month and the amount you borrow is based on your level of income and expenditure.

There’s also a two year discounted-rate loan with a rate of 3.3% (the standard variable rate is currently 4.2%).

There’s also the option to choose your borrowing term, up until the youngest borrower reaches the age of 95. However, the oldest someone can apply is the age of 85. On joint accounts, the criteria applies to the youngest borrower so if only one of you is under 85 you can still apply.

Hodge Lifetime will lend a maximum of £500,000, 60% of the value of your property or the amount it considers affordable based on your circumstances. 

The property you buy must be in England and worth between £170,000 and £1 million.

Employment, pension, investment and rental incomes are all taken into account to assess your eligibility. If you opt for a joint mortgage the ability of the surviving borrower to repay will also be factored in.

You can even overpay up to 10% before an Early Repayment Charge kicks in.

As with all interest-only mortgages, you must have a suitable strategy to repay the loan capital at the end of the mortgage term. This could be done by downsizing to a smaller property, selling another property such as a holiday home or selling other investments like stocks and shares.

You must have £150,000 equity remaining if you're looking to downsize (possibly more if you live in an expensive area). 

What you need to consider first

Taking out a mortgage in later life could impact on a number of things like your family’s inheritance after you die or the ability to cover additional care in later life. Your future borrowing and home moving opportunities could be limited too.

Having a payment plan in place is the most important though. The FCA estimates that many interest-only borrowers who will reach their term in 2020 won't have a way of paying off the debt.

Read Your options if you’re struggling to pay off your interest-only mortgage for advice on what to do next.

Compare a range of fixed rate and interest-only mortgages with loveMONEY

The latest from loveMONEY:

0% credit card competition hots up

How much poorer the Government says we'll be if we Brexit

We're all facing debt of £54,000 thanks to unfunded pensions

Why checking this could save you THOUSANDS