Am I too old to get a home loan?
Lenders cannot discriminate on the basis of age although some loan products do have an upper age limit.
Lenders insist this isn't age discrimination as they have a legal obligation to ensure borrowers won't suffer undue hardship because of their loan. If you could only meet your contractual finance obligations by selling your principal place of residence, it is presumed the loan is 'unsuitable' -unless the contrary is proved.
You may be able to obtain a loan for other purposes such as renovation or an investment property.
All lenders are obligated to ensure borrowers meet requirements to repay a loan within the loan period - whether they are 21 or 61 years old.
If you are over 45 many lenders will take a more cautious approach as to how you will repay a 30 year loan. The nearer you are to retirement age - generally accepted as 65 but moving to 70 - the more likely your loan term will be reduced or you will be required to provide an 'exit strategy' detailing how you will repay your debt on retirement or death.
A new loan product has been introduced that allows the equity in the property to be drawn down in a lump sum, installment basis or line of credit unlocking some of this asset base. These loan are
commonly known-as reverse mortgages or equity release mortgages.
You don't have to make repayments although you can do so if you wish. The lender will recoup the full balance when the borrower either pass away or the property is sold.
In September 2012 the government introduced 'negative equity protection' on all new equity release products to ensure you cannot end up owing the lender more than your home is worth. The maximum amount you can borrow is generally between 15% and 30% of the value of your home depending on your age.
If contemplating an equity release loan important factors you need to consider include:
• Interest rate and property price forecasts
• Increased life expectancy -will you have sufficient funds if aged care or housing needs change?
• Pension and tax implications
• Terms and conditions such as break fees
Anyone seeking an equity release finance arrangement must be taken through the finance calculations in person before taking out this type of loan. It is essential you are fully aware of all terms and conditions.
Not all finance specialists offer equity release products so we suggest you contact us we will be happy to discuss the most suitable finance option for your situation. Your current situation as well as all possible future needs should be part of any finance discussion.
The very best finance option of all is to plan ahead. The number of people over 65 still holding a mortgage increased by 28% in the past 3 years.
If you do require additional funds in retirement alternative equity raising options may include:
• Downsizing to a smaller property and investing remaining funds for additional income, you should explore taxation or pension implications
• Selling your property and co-funding a dual occupancy or granny flat with family, it is recommended you have a formal agreement in place