When applying for a mortgage in Australia, your lender will consider various factors, including your age. They want to know that you will be able to repay the loan, not only now but in the future. So, how do lenders evaluate your application, and what can you do to increase your chances of approval?
What is the Maximum Age for a House Loan?
There is no commonly acknowledged, industry-standard maximum age restriction for home loan eligibility in Australia. In fact, persons as old as their 60s and even their 70s may be eligible.
The Age Discrimination Act of 2004 and the National Consumer Credit Protection Act of 2009 prohibits lenders from discriminating against mortgage applicants based on their age.
On the other hand, lenders have a responsibility to guarantee that anybody to whom they lend money may readily repay the loan without suffering excessive financial difficulty.
Most Australian lenders did not have any age restrictions on their mortgages in the past. However, a few lenders, notably Bank of Queensland and loans.com.au, have recently imposed age restrictions on some house loans. Where age restrictions exist, they usually range from 65 to 75 years old.
All in all, the older you are, the more criteria you may face when it comes to house loan approval.
Is There a Certain Age When You Can’t Get a Home Loan?
Most lenders regard 65-75 as the retirement age in Australia because there is no mandatory retirement age. As a result, those over the age of 35 who want to get a mortgage may need to demonstrate that they can pay back the loan before they retire.
Although each lender has its unique retirement age policy, lenders will look at your occupation and expected retirement age if you’re 35. Here is a rough guide for what you may expect.
- 45: You may be asked to provide superannuation statements or prove that you have a plan to repay the loan when you retire.
- 50: Most lenders will approve your application; however, some may reject it owing to your age.
- 55: Almost all lenders will want to see a documented exit strategy and proof of your superannuation and other assets that may be sold to pay off the debt.
- 60: Due to your age, most banks are likely to reject your application. Your loan may be authorised if you have a steady source of income after retirement or have assets you may sell to repay the debt.
- 60 and up: You’ll only be eligible to borrow money with a senior’s equity loan (reverse mortgage) or a regular loan if you can show that you have a steady source of income after retirement.
Why Are Lenders Wary of Lending to Senior Citizens?
Lenders are not permitted to discriminate based on age, but they must still ensure that you meet the standard lending requirements. This is determined by your ability to repay your loan on time during its term.
The income you generate is the most crucial aspect of your capacity to repay a house loan. So, if you’ve already retired or expect to retire in the next few years, you’ll need to persuade the lender that you’ll be able to service the loan (i.e., make the repayments) even if you don’t have a job.
In addition, the lender must be confident that you will be able to repay the loan. Considering that the average house loan length is 30 years, a 65-year-old borrower may be approaching their 100th birthday before paying off their 30-year loan. However, for the lender, this might be an intolerable risk.
That doesn’t rule out the possibility of obtaining a house loan as an elder Australian. However, your application may be granted if you have your finances in order and can demonstrate your capacity to repay the loan.
However, after you reach the age of 65 or older, getting a mortgage becomes significantly more complex.
What is the Best Strategy to Have Your Loan Application Approved When You’re Over 40?
While getting a house loan approval is more challenging for older Australians, it is not impossible. The best way to increase your chances of getting your mortgage application accepted is to work with a finance broker to develop a tailored exit strategy.
When it comes to lending to clients who want to retire or are already retired, some lenders have no limits — even if the loan period surpasses their retirement age.
However, if your loan duration continues beyond your retirement age, banks will want to know how you plan to repay the loan after you retire, referred to as an exit strategy. In other words, an exit strategy describes how you’ll pay off your mortgage without going into debt.
What Are Some Widely UsedExit Strategies?
- Selling your home and moving into a smaller home is an excellent way to downsize your property.
- Assets such as an investment property or stock are sold.
- Superannuation money is a recurring source of income.
- After you retire, you can use your superannuation to make a lump sum payment.
Your age, financial situation, income level, and retirement goals factor into the optimal exit strategy. They’re supposed to indicate that you’re capable of repaying the loan. If there is any hesitation, you may be turned down.
Many elderly customers choose to downsize as an exit plan since owner-occupied houses are not subject to capital gains tax when they sell and downsize. Therefore, you may be intending to downsize your house once your children have grown up and left home.
Mortgage Broker Recommendations for Senior Borrowers
If you’re a senior borrower, you can increase your chances of getting a house loan by doing the following:
- Consider a shorter loan term to pay it off before you retire.
- If the loan duration exceeds your retirement age, you’ll need a good exit strategy.
- Apply with a more lenient lender for senior borrowers.
- Pay off as much outstanding debt as feasible to improve your chances of acceptance.
- The more money you have in savings, the more money the bank is ready to lend you. Your borrowing power will grow if you can demonstrate consistent financial discipline.
- Are there any blemishes on your credit report? Finding out what you need to do to enhance your credit history will substantially boost your chances of getting a house loan approved.
- If you’ve paid off a prior mortgage, your application will demonstrate that you’re a trustworthy borrower. A large superannuation balance might also assist you to persuade a lender that you are not a risky borrower.
Do you require assistance with your mortgage? Many specialise finance brokers specifically assist folks over 50 in obtaining house loan approval.
If you’re having trouble finding a lender, speaking to a reputable financer broker or skilled mortgage broker can help get your application approved despite your age. Mortgage brokers are professionals who can genuinely assist borrowers under challenging situations.