When are you considered too old to get a buy-to-let property?
Times are changing. People live longer and sometimes make investment decisions later in life. Traditionally, you would think of people in their middle-age to make long-term investments, such as buying an investment property. And rightfully so, assuming they’ll need at least a 20 to 25 years mortgage term. But, surprisingly, a recent report from Paragon Bank revealed that buy-to-let purchases in the past year (June 2020- June 2021) by people nearing retirement age, that is, between 60 to 64-years olds increased by 52%. So, when, if ever, are you considered to be too old to buy a buy-to-let property, and what does it take to do so?
Is there any age limit to purchase a buy-to-let property?
No, as long as you can finance it, you can purchase a new investment property at any age! The finding from the abovementioned report suggests that most of the over 60-s UK investment property buyers last year did it as a result of one or the combination of the following:
– A redundancy or earlier retirement, which allowed them to access their pension’s lump sum;
– Experienced landlords taking advantage of the Stamp Duty Holiday;
– They received an unexpected inheritance, which allowed them to make the purchase.
The report also suggests that those nearing retirements seek property and buy-to-let income as a more stable additional source of retirement income than low returns from a savings account and stock market volatility. People nearing their retirement prefer steady and calculated returns.
While we now have a better understanding of the last year’s surge of later in life buy-to-let buyers, the real question you should ask is:
Is there an age limit for buy-to-let mortgages?
While there is no such thing as a maximum legal age for applying for a mortgage, most lenders have age limits as to how old you can be at the end of the mortgage term. The age limits are usually between 70 to 75 years, however, some lenders extend it up to the age of 80, or even 85.
However, the process of getting a mortgage for over 60s can be a bit more complicated, as banks or lenders will see it as a higher risk operation with some clients no longer having income from employment, and instead relying on their pensions, or another buy-to-let income to support their lifestyles.
The lenders might:
- Undertake a detailed assessment of the affordability of a mortgage in relation to your (retirement) income and other debts, if any;
- Require from you a higher deposit amount, 40% rather than the usual 30%;
- Require that you find a guarantor on your mortgage.
Minimum income requirement
While, in principle, buy-to-let lenders don’t need to have a minimum income requirement as they rely on the rental income to cover the mortgage costs, some lenders might impose other eligibility criteria for the older lenders to secure the loan repayments.
Will I need a larger deposit if I’m an “older” buy-to-let landlord?
Some lenders might ask you for a larger deposit, which can give you access to more competitive rates. The usual 70% to 75% Loan to Value ratio (LTV) might increase to 65% or 60% for older borrowers. You may also find that some lenders have even stricter restrictions on maximum LTV based on age in order for you to get competitive rates. All of these will depend on your personal circumstances and the particular lender you are in talks with.
Will I need a guarantor?
Not necessarily, but again, if you are nearing 70 years of age and don’t have enough downpayment to get the best mortgage rates, you may want to consider either a joint mortgage with your child or make them their guarantor. As guarantors, they agree to take 100% responsibility to pay for the remainder of the mortgage should you not be able to do so.
Stamp Duty Holiday is over. Does it still make sense to invest in buy-to-let in the UK at my age?
The UK housing market has been strong and increasing in value over the years, with predictions it will continue to do so in the next five, ten years and beyond. So, even if your initial stamp duty rate will be regular if you buy a property today, the benefits of the investment will be seen and felt for years.
If you want to invest in a buy-to-let in the UK to boost your retirement income, you can still look for an interest-only mortgage, which will allow you to do so, although it is important to remember that the debt has to be repaid at the end of the mortgage term.
Final advice: don’t do it alone
You should consider using a mortgage adviser who can give you an idea about how much you can borrow and search for a lender which offers the best mortgage terms. A mortgage advisor can also discuss with you different mortgage types and advise on what should work best for your situation. Most importantly, finding out how much you can borrow in principle at your age will also tell you whether a property purchase is a viable option.