What the bank perceives as too old to take out a loan or a mortgage and what you believe that age should be are two different points of view because the decisions are based on contradictory criteria. Unfortunately, it is the banks that get to make the final decision and getting past their base criteria can be troublesome or sometimes, impossible. Turning to a mortgage broker for help can ease your situation.
Age Related Rules
The majority of banks have some simple basic rules. The maximum term for your mortgage is 30 years. The maximum age you can carry a mortgage is 70 years of age. The easiest mathematical quest will tell you that you can’t have a 30 year mortgage after the age of 40. The cheapest monthly payments arrive with a 30 year mortgage term. For every year the term is reduced, your monthly mortgage payments go up – because the loan has to clear in a shorter time frame.
The second rule the banks work from is how much income you have and when will you be able to make your monthly loan or mortgage payments. They don’t want your loan to continue after you retire because they perceive that your income will reduce either partially or significantly. To be fair to the banks, they shouldn’t lend you money for a time in your life when you won’t be able to make repayments. If you consider the bad publicity they would receive coupled with the possible loss of your home because you can’t make payments, you can see their point of view.
Responsible Lending – Seek Home Loans Help
Banks have to lend money responsibly. In the past few years during the recession, they have learnt many lessons about lending money, lending too much and lending to people who might not be able to repay the debt. This was one of the most glaring pieces of education for banks who sometimes lent money to people who didn’t need to prove they could pay, which became the largest area of defaulting loans and mortgages.
You can talk to banks about retiring later and age discrimination, but perhaps arranging for your loan or your mortgage broker to present your case for you will help your situation, if you are convinced you can maintain a loan beyond the standard periods.
Increasing the Pension Age
Between 2017 and 2023 the qualifying age for Age Pension will move up to 67. This might help banks become more flexible with the termination date of a loan or mortgage.
If you need to stretch the years beyond the bank’s current rules, you could consider Equity Release. If you are over 63, banks will lend you money based on the equity in your home. You won’t need to make monthly repayments, but interest will be charged and the debt will increase against your property’s value.
If you are worried about how old is too old when taking out a loan, ask your mortgage brokers to help you structure the right deal for you.