Length of Mortgage Question

C

CAA

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My husband and I are buying our first home and now in the process of getting a mortage to fund it. Both my husband and I have advanced degrees and professional jobs, and both of us plan to work until retirement age. There is 15 years age difference between my husband and I - he will reach 65 in 21 years, and I will be 65 in 36 years. Much to my surprise, all of the banks we've called thus far are making the assumption that BOTH of us will no longer be working 21-25 years from now and refuse to give us mortgages for more than 21 or 25 years (depending on the bank). While all the banks are willing to loan us double the amount we actually need (based on both our incomes), they expect us to pay it off in almost half the time of a younger couple so our monthly payments are impossibly high for a relatively small mortgage!

This bank policy seems unfair to me. Why do they assume I will stop working when my husband stops even though I will only be 51-56 and possibly in the prime of my career (lecturing in university)? More importantly, do any of you know of banks that don't base the duration of their mortgage on the age of the oldest applicant?? Is there anyway around this silly rule?? While I understand it's probably in our best interest to pay off our loan as soon as possible, I would like to keep the monthly payments affordable based on one income should one of us decide to go part time for a few years while we are raising small children. We plan to make extra payments as long as both of us are working to get the mortgage paid off early.

Thanks in advance for any feedback!
 
Try getting in touch with a good broker, they can be very helpful when you are slightly outside the box that banks prefer.
 
You say that banks are prepared to lend you double what you need. Would you qualify for the loan you need based on just your income? If so, you (or your broker as Vanilla suggests) should be able to get a lender to loan with a term expiring on or before your retirement age, rather than your husband's.

Liam D. Ferguson
www.ferga.com
 
Following on from the previous poster's advice and if your salary will not allow you to get enough of a mortgage would you be able to get two separate mortgages of different lengths, one based on your salary and age and one based on your husband's salary and age. I don't know if this is possible but no harm asking.
 
Another alternative would be to take an interest only (or part interest only) mortgage so that the monthly payments suit your current lifestyle and pay off the capital in lump sums as and when you can.

Sarah W
 
My current finance loan for new house build is 27 years and i'm 43.As soon as my old house is sold it will be down to 15 years or less.
ICS HAVE MY MORTGAGES /SINGLE INCOME /THROUGH THEIR OWN BROKERAGE
THE MORTGAGE STORE
 
Thanks for all the great feedback! This site is awesome! Just to give you an update and ask for a point of clarification...

We have 2 options:
1- NIB has been amazing and is willing to give us their max term of 30 years based on my age on a 4.52% tracker LTV. They claim that the short term limits that the other banks have offered us based on my husband's age are unethical and discriminatory. This gets our monthly payments down to an affordable level and seems like the best option to me.

2- Our broker is pushing us to stick with the 25 yr term all the other banks are offering and instead go with an interest only mortgage to keep the monthly payments down. I can't figure out how this would be a better deal than option 1 - even though the monthly payment would be about 500/month less, the cumulative interest looks like it would be enormous, but our broker insists the interest would only be an additional 400/yr compared to a traditional mortgage and we would just have to make quarterly lump sum payments to keep from paying a balloon payment at the end. Does his arguement make any sense or is he bluffing because he can't compete with NIB's offer?

Thanks again for all the help! CAA
 
You're not really comparing apples with apples given the difference in term between the two options. In general, a lower rate of interest means that you will pay less. But stretching the loan out over a longer term means that you will pay more.

If your broker is pushing you, ask him/her to show you the cumulative interest including the overpayments.
 
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