Concerns about acquiring a mortgage or settling an existing one are often influenced by the borrower’s age. The age at which people purchase their first property has seen a significant increase, affected by factors such as high house prices, banking norms, and a predisposition to set up house at a later age.
Presently, only about 20% of first-time property buyers are under the age of 30. This is a stark contrast to 2003 when the corresponding figure was 60%, as per statistics from the Banking and Payments Federation Ireland (BPFI). The median age for first-time borrowers reached 35 last year, with almost half of the borrowers older than that. This is a noticeable increase compared to the 36% and 17% seen in 2019 and 2004 respectively, indicative of an ageing borrower demographic.
The trend isn’t limited to first-time buyers; the median age of all property buyers in Ireland in 2021 was 39 according to the Central Statistics Office – an uptick from 35 in 2010. The real estate market’s volatility, demonstrated by the housing price crash that led to negative equity for many, delayed many buyers’ upgrade plans. Further, the Covid-19 pandemic led to additional delays, implying that by the time some buyers settle their plan’s financing, they’ll be older than they had initially anticipated.
Mortgage payment terms vary between five and 35 years. The longer the term, the less the monthly instalments will be, but this also increases the total interest paid. On the contrary, a shorter term results in higher monthly payments but less total interest. The median mortgage term for first-time buyers in Ireland in 2021 was 30 years. Interestingly, about 40% of these mortgages had loan terms exceeding 30 years, with the longest being 35 years. With nearly half of first-time buyers older than 35 years at the time of borrowing, it seems that mortgage durations are comfortably extending into borrowers’ twilight years.
In most cases, employment contracts stipulate a compulsory retirement age, typically 65. However, to be eligible for a state pension, an individual must currently be at least 66. This creates a possible five-year window during which a retiree may be required to make mortgage repayments without the security of a job or a state pension. This issue particularly affects the older population, with nearly 10% of respondents in a recent survey by Royal London Ireland indicating they expect to be paying their mortgage beyond the age of 70. The number was even higher among those over 55. The survey also revealed that 8% of mortgage holders believe they’ll be freed from their mortgage obligations only at the age of 75. The discrepancy lies in the presumption that some people will continue to work beyond 65 or be able to finance their mortgage out of their pension.
As the borrower demographic gets older, lenders are adapting to ensure they can still offer loans. “A noticeable shift has occurred among lenders. Previously, the age limit was strictly 70, but now, if the borrower is slightly older but can prove they can repay the mortgage at 70, lenders will entertain the application but need reassurances about how they will manage repayments post-retirement,” according to Trevor Grant, chair of the Association of Irish Mortgage Advisors and Affinity Mortgages representative.
For owner-occupiers with AIB, the loan term can be extended up to 35 years, provided the repayment occurs by a specific age. For instance, a PAYE worker must repay the loan by their 69th birthday or by 71 if they can prove they will still be earning a salary. If they retire before 69 and want the maximum term, the bank states they need to assess their capacity to meet repayments after retirement.
Individuals who are self-employed are obligated to clear their mortgage payments no later than their 71st birthday. This deadline is applicable also for top-up mortgages, which help finance home refurbishments by borrowing against your home’s equity. PTSB mortgage terms allow for repayment up until the age of 70, with individual loan viability determined by a case-by-case review of a borrower’s repayment capacity until the end of the term. This holds true for first-time homeowners, those switching lenders, and individuals seeking top-up mortgages.
Bank of Ireland stipulates a maximum mortgage term of 35 years, contingent on the customer’s ability to sustain repayments throughout the entirety of this term. The bank entertains loan applications extending into the borrower’s post-retirement years, sometimes beyond 70, provided the client can demonstrate continued repayment capacity.
Gaining loan approval past the age of 70 requires proof of a borrower’s ability to keep making payments, according to Grant. Lending institutions have been analysing projected pension fund values. For successful entrepreneurs who have chosen to go it alone, lenders need an exit strategy outlined. However, predicting the financial health of pensions at retirement is uncertain. In the same vein, substantial pension contributions reflected in current pay stubs might cease if an individual decides to change employment.
Grant indicates that there are no guaranteed future outcomes. Some people see it as a mere formality, however, he thinks lenders are genuinely interested in urging borrowers to deliberate this matter.
The emerging mortgage firm, MoCo, grabbed attention last year with their proposal allowing Irish borrowers to have mortgages repayable up till the age of 80. If you’re planning to retire before this age, MoCo will evaluate your potential to stay on top of your mortgage after retirement. This may necessitate an “enhanced individual assessment”, potentially requiring proof from aprofessional financial consultant outlining repayment strategies. However, it is uncertain how many people wanting a loan term extending till 80 will have their applications approved. There’s no doubt lenders need to be transparent in their application assessment processes.
Avant Money suffered a setback in the previous year, being compelled to reimburse a man over €8,000. The cause: a broker indicated that owing to his being older than 70, the man was ineligible to seek a mortgage switch with the financial firm. The individual confronted Avant directly, and the head of its mortgage operations clarified that the company’s policy didn’t cover extending mortgages to applicants past the age of 70.
Interestingly, at that time, Avant’s lending policy did accommodate exceptions for applicants beyond 70 if justification of repayment capacity could be provided. The man asserted that he was barred from presenting evidence of his financial standing. Avant was found guilty of age-based discrimination under the Equal Status Act 2000 following the man’s complaint.
According to financial planning consultant Daniel Hardiman of Hardiman Life and Pensions, paying a mortgage post 70 isn’t ideal but it’s sometimes the only route for people in their early 40s wishing to cease renting. He has clients who due to financial changes, had to reschedule their mortgage to a date beyond their retirement age.
Hardiman points out that many similar clients end up working past 65 unless they have the ability to access a tax-free 25% pension lump sum or stand to inherit. Quite often, he sees clients at this life stage employ such a lump sum payment to settle their mortgage.
On the topic of mortgage safeguarding, he states that if you carry a mortgage, then mortgage-protection insurance can take care of the debt should you die. He mentions, “If you are in fine health, you may seek mortgage protection until the age of 89.” However, the longer your mortgage term, the heftier the mortgage protection costs. For example, a 40-year-old couple with a €300,000 mortgage lasting until 65 would pay roughly €33 monthly. If their mortgage was scheduled to continue until the age of 75, the cost would increase to about €47 monthly. Faced with financial changes necessitating a longer mortgage repayment period, you would have to increase your mortgage protection coverage also, a process that could prove challenging if you’re in poor health.
Hardiman recommends adding a continuation or convertible clause while procuring mortgage-protection insurance. He notes that this would increase the premium marginally by €2 per month.
This clause enables the policy holder to extend the duration of their mortgage protection till the age of 85 without the requirement for any medical underwriting, making it impossible for insurance providers to deny coverage based on poor health.
Hardiman emphasises the importance of this clause for those planning to restructure their mortgages to end at a later date, and for those with adverse family medical history.
He also advises about the necessity to frequently change mortgage-protection insurance providers, as it may offer reduced premiums or additional benefits such as the convertible feature.
Hardiman cautions that if you’ve previously extended the time frame of your mortgage, ensure that the end date of your life-insurance policy aligns with the end date of your mortgage. If not, the lack of coverage may bestow financial burden upon your dependents.