WANNABE homeowners may find that their job affects their chances of getting a super-long mortgage.
Brokers have said that professions such as firefighters, police officers, and construction workers are less likely to qualify for 40-year mortgages.
Mortgages with long terms have jumped in popularity due to rising housing costs and buyers not being able to afford shorter home loans.
It means that first-time buyers in careers with an early average retirement age may find it harder to get a mortgage.
Manual jobs like policing, firefighting or construction work may force you into early retirement because of the risks of inducing poor health or physical stress.
For example, the normal retirement age for firefighters is 55, according to the Firefighters’ Pension Scheme.
Most police officers also retire between 55 and 60 years old, government statistics show.
However, these early retirement years can be problematic for those wishing to be accepted for a longer-term mortgage product.
Mark Harris, chief executive of mortgage broker SPF Private Clients, says: “If a borrower wants to take on a mortgage beyond normal retirement age, the lender will review the job they do to see whether this is feasible.
“It makes sense as physically taxing jobs may simply not be possible into your seventies, such as policing or construction work.
“It is the lender’s job to ensure the borrower can afford the mortgage and will comfortably be able to pay it back, so those with desk-based jobs such as accountants or writers are more likely to have a mortgage into retirement approved.”
JOBS WITH EARLY RETIREMENT AGES
Here’s a full list of jobs with lower typical retirement ages:
- Police officer
- Firefighter
- Medical worker
- Construction worker
- Electrician
- Plumber
- Decorator
- Pilots
- Flight attendant
- Officer in the armed forces
According to UK Finance, approximately 21% of first-time buyers are now opting for mortgage terms longer than 35 years, a significant increase from 9% in March 2022.
Extending a mortgage term beyond 30 years enables buyers to borrow more while keeping their monthly payments lower, making it initially easier to enter the housing market.
However, these types of mortgages end up costing more than those with shorter terms as interest racks up.
Research by lender Santander reports that one in five first-time buyers is now over the age of 40, with the average age of first-time buyers being 36 in 2022.
This means that the average first-time buyer would not pay off a 40-year mortgage until age 76.
Lenders have strict age limits for mortgages.
For example, Halifax sets a maximum age of 80 for all repayment mortgages and 70 for interest-only mortgages.
However, it’s not always bad news for those with lower forcasted retirement ages.
Adrian Anderson of mortgage broker Anderson Harris told The Telegraph that while the lenders may not refuse outright to lend over longer terms to those who will not be able to work in their role for the full 40 years, house buyers would need to prove that.
GETTING THE BEST MORTGAGE DEAL
Here James Flanders, The Sun’s Chief Consumer Reporter, explains how to bag the best deal on your mortgage:
If you’re on the hunt for a traditional repayment mortgage, getting the best rates depends entirely on what’s available at any given time.
However, there are still several ways to ensure you land the best deal.
To begin with, you should always use a mortgage calculator to get a ballpark figure on how much most lenders would be willing to offer you.
There are plenty of tools out there, including one on MoneySavingExpert.com at www.moneysavingexpert.com/mortgages/how-much-mortgage-borrowing.
Usually, the larger the deposit you have, the lower the rate you can get.
If you’re remortgaging and your loan-to-value ratio (LTV) has changed, you’ll get access to better rates than before.
Your LTV will go down if your outstanding mortgage is lower and/or your home’s value is higher.
A change to your credit score or a better salary could also help you access better rates.
And if you’re nearing the end of a fixed deal soon it’s worth looking for new deals now.
You can lock in current deals sometimes up to six months before your current deal ends.
However, the exact amount of time you can lock in a new deal will depend on your provider.
Some lenders have decreased this timeframe in recent weeks, including Santander and Nationwide.
Try to avoid leaving a fixed deal before it expires, as this will usually come with an early exit fee, so you want to avoid this extra cost.
If you’re starting your mortgage search, visit comparison websites to get familiarised with the latest deals.
MoneySavingExpert.com offers a great Mortgage Best Buys tool at www.moneysavingexpert.com/mortgages/best-buys.
However, I’d always advise you to get advice from a mortgage broker, too.
They can compare a much larger range of deals and offer expert advice.
Some will charge an extra fee, but there are plenty who give advice for free and get paid only on commission from the lender.
When taking out a new mortgage, you’ll also need to factor in fees for the mortgage, though some have no fees at all.
You can add the fee – sometimes more than £1,000 – to the mortgage cost, but be aware that doing so means you’ll pay interest on it, which will cost more in the long term.
THE RISE OF LONG-TERM MORTGAGES
Longer-term mortgages gained popularity after the fallout from Liz Truss‘s mini-budget which led to soaring mortgage rates.
The average two-year fixed rate stood at 5.93% at the start of June, while the average five-year fixed rate stood at 5.50%, according to MoneyFactsCompare.com.
This contrasts dramatically with typical rates for a two-year fixed deal in December 2021, which once stood at 2.34%.
At the same time, homeowners could bag a five-year fixed rate at just 2.64%.
Longer-term mortgages of 30, 35 and even 40 years can be used to help borrowers reduce their monthly costs.
When interest-only mortgages were all the rage, this was often used as a tool to keep monthly payments down, but of course, the capital would need repaying at a later date.
Mark said: “Nowadays, repayment mortgages are much more commonplace, but of course, this means a higher monthly cost, so spreading it over more years reduces the monthly outgoing.
“However, it also results in more interest being paid over the term of the mortgage, so borrowers need to monitor the overall cost and overpay as and when they can.”
According to UK Finance, by the end of 2023, around one in five first-time buyers were borrowing for a term of more than 35 years.
This is compared with fewer than one in ten the year before.
Stretched mortgage terms can affect some borrowers’ plans for retirement.
But more budding buyers are choosing longer mortgage terms as a way of coping with interest rate hikes.
Usually, the shorter your mortgage term, the higher your monthly repayments will be.
However, the trade-off is your mortgage will cost you less overall.
Those opting for 30, 35 or even 40-year mortgage deals will pay less each month but much more overall.