There are several criteria commonly used by lenders when considering an application for a buy to let (BTL) mortgage. Although how these criteria are applied might vary from time to time and from one mortgage lender to another, the following are typical factors:
- you need to be interested in investing in residential property;
- you understand and accept the risks of such investments;
- your financial circumstances mean you can afford to take those risks;
- you have a sound credit record – and, preferably, own your own home; and
- until very recently, at least, you have to have been no older than 70 to 75 years of age when the mortgage came to its full term. So, for example, a 25-year buy to let mortgage taken out by someone as young as 45 would not end until they reached the age of 70.
Is there still a BTL mortgage age limit?
In recent years, mortgage lenders generally seem to have adopted a far more relaxed attitude towards those upper age limits.
The effect has been to encourage property investors to remain in the buy to let mortgage market until they are considerably older, well into their retirement, and in some cases up to 85 or even 95 years of age when the mortgage reaches full term.
As the tenancy deposits protection company My Deposits puts it, age is no longer a limit for buy to let borrowing.
The company points out that there are currently more than 2,000 buy to let mortgage deals on offer, with two-thirds of them prepared to entertain loans that do not reach full term until the individual reaches up to 85 years of age. More than that, 9% of buy to let mortgage deals have a maximum age limit of 90, while 5% have no upper limit at all.
An article by the Consumers’ Association’s Which? magazine confirmed the trend by identifying a range of mortgage products specifically designed for those who have already entered their retirement. The products might be used to help to augment incomes during those retirement years or as an aid in releasing equity built up in the property owned by older people.
The article gave the example of an individual retiring at the age of 65, who could now consider taking on a 20-year buy to let mortgage that would run until they reached the age of 85. This option was simply unavailable only a few years ago when the age limits were around 70 to 75.
Why are age limits used anyway?
Any mortgage lender is interested in one thing – and that is knowing that their money is safe and that the borrower continues to make the necessary repayments as they fall due until the end of the mortgage term.
For that reason, lenders are accustomed to doing everything in their power to assess the affordability of a mortgage, the creditworthiness of the applicant, and the security of their employment and income.
Those considerations are every bit as critical when assessing applications for buy to let mortgages. Indeed, because few people under the age of 21 are likely to have built up a credit history of any standing or reliability, many buy to let mortgage lenders typically require applicants to be at least 21 years old. (This isn’t to say that you cannot get a BTL mortgage if you are under 21 – there are still some mortgage providers who will lend to you. A BTL mortgage broker can help you identify those lenders who lend to younger and older bororwers).
The principle on which a buy to let mortgage is founded is that the let property pays for itself. The loan is based on the fact that rental income will more than cover the monthly mortgage repayments – and the maximum amount of any loan is based on multiples of that predicted rental income.
But the lender must also build in a security net or back up against the possibility of the property remaining empty, with no tenants paying rent, for an extended length of time. In that event, of course, the borrower is going to be hard-pressed to make the monthly mortgage repayments.
If the borrower has already reached retirement age and relied on a pension as well as income from let property, went the logic, then the risk of a default on mortgage repayments was greater.
As we have seen – and as borne out by the current lending policies of many mortgage providers – age is no longer a barrier or obstacle to obtaining a buy to let mortgage.