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Mortgage Law

Mortgage Age Limit

There are general limits on the age that a borrower must be to enter into a mortgage contract. There is a definite lower limit but a high end limit is not so easy to define.

Lower Limit

Assuming everything else is OK, the lower age limit to enter a mortgage arrangement is 18. This is because a person under that age is not legally entitled to own property in their own right or to enter into a legally binding contract. There is a small exception where a person under 18 may own a property if they are the beneficiary of a trust, but in that case it would be the trustees who would be the borrowers and enter the legal agreement.

Of course, even if the borrower is over 18, other lending criteria will apply, not the least of which is an acceptable level of earnings. The lender will need to be satisfied that mortgage payments could be met without financial stress. The lender will also be concerned about employment history and the level of income over the last three years. In reality, even though the lower age limit might be 18, in practical terms it may be more like 21.

Upper Limit

The upper age limit is far more difficult to be exact about. It is believed that the highest age that a UK resident was granted a mortgage was 102. This was in 2007 when the man was granted a 25 year buy to let mortgage. In this arrangement, the rental income from the property was to fund the mortgage.

The upper age limit used by most UK lenders used to be 65, the state retirement age. During the recent property boom many lenders lifted the age to 70 and then to 75 which is the limit for most lenders in 2011.

There are a small number of lenders who do not apply an upper limit at all. However, they only grant loans to people aged over 75 in very special circumstances.

Equity Release Schemes

These are special arrangements where a loan is granted to older people to release equity from their homes to fund them in retirement. There has been a great deal of controversy over these schemes and anyone considering such a scheme should get independent financial and legal advice before entering the scheme.

The basic concept is that the lender advances money to the borrowers by way of a loan secured on their house (A mortgage.) A part of the agreement is that the lender will obtain possession of the last borrower to die. They will then sell the home to recover the original sum advances and the accumulated interest. If there is any balance left after that, it goes to the estate of the last survivor.

The lower age limit for these schemes is usually 60 and some lenders apply an upper limit of 80, but these schemes are constantly changing.

Image: graur codrin / FreeDigitalPhotos.net


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