Strategies for over 50-year-old borrowers

Font Size:

In 2014, the lending regulator suggested to banks that they think twice before offering loans to people nearing retirement or already retired.

In a practice guide on residential mortgages, the Australian Prudential Regulatory Agency (APRA) advises: “Future changes in a borrower’s circumstances, such as the likely lower income and repayment capacity during the impending retirement of a borrower, would also be considered by a prudent ADI (deposit taking bank). It would be prudent not to rely on the presumption of future superannuation lump sums unless the lump sum is verifiable and reasonably imminent.”

While APRA provides guidelines on how much risk banks should entertain when lending to certain groups, it is up to the lenders themselves to make the final call.

During the banking royal commission, a number of incidences have surfaced of unethical lenders who did make the call to write loans to elderly people who had limited capacity to service a mortgage, unless their house was sold.

No doubt when the royal commission winds up, there will be further calls for banks to think wisely before lending large amounts to those over 60.

Borrowing during your 50s is not as easy as borrowing during your 30s or even 40s, especially if you do not own a home and are considering a 25-year or longer loan. The chances that you will likely not be working beyond 65 or 70 will be taken into account by a lender who rightfully will need to know how you will service your loan after your wage-earning days are over.

One reverse mortgage broker, Seniors First, lists all the top lenders on its site and claims it can help older borrowers and pensioners access funds. However, when YourLifeChoices requested an interview with the broker about the terms of loans on offer to older borrowers some time ago, it was declined.

In 2011, the National Consumer Credit Protection Act made changes to rules on responsible lending to borrowers over the age of 50. This group now has to demonstrate an ‘exit strategy’ for what will happen with the loan when they retire, according to online lender State Custodians.

The organisation said that would-be borrowers had a better chance of obtaining a loan if their exit strategy included the potential to:

  • sell an investment property or other assets
  • earn income or payout from superannuation
  • downsize from their property
  • receive investment or other income that will continue into retirement, such as an annuity.

If you are struggling with your finances and need a smaller amount of money than a traditional mortgage you may be able to receive a personal loan. But beware, these often have high interest rates.

It is worth checking first to see if you qualify for a loan from the Government. According to MoneySmart, the Department of Human Services offers some alternatives:

  • Pension Loans Scheme – If you are a retiree, self-funded or a pensioner, you can use your real estate as security for a loan under this scheme.
  • Advance Payment – You can receive your social security payment in advance if you need some help to cover immediate expenses.

Are you over 50 years of age and wondering if you can borrow from a bank? Have you been turned away by lenders because of your age?

Disclaimer: All content on the YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regards to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances. Financial comments provided by readers cannot be relied upon as professional advice, because they are not verified independently by YourLifeChoices.

Join YourLifeChoices today
and get this free eBook!

Join
By joining YourLifeChoices you consent that you have read and agree to our Terms & Conditions and Privacy Policy

RELATED LINKS

Mortgages over 50 not so easy to secure

You may find that getting a mortgage over the age of 50 isn't so easy.

Federal Budget 2018: Pension Loans Scheme broadened, amounts increased

Borrower eligibility extended and amounts increased.

Reverse mortgage pitfalls

A few years ago reverse mortgages may have been seen as the answer to many people's financial woes

Written by Olga Galacho

7 Comments

Total Comments: 7
  1. 0
    0

    Saving and slowly building up an emergency fund is a better idea. Far cheaper and guaranteed. Something everyone can do if they put in the effort and discipline.

    It’s crazy to borrow money when you are on a limited retirees income.

    The time to organise savings was during your working life. It’s way too late after working is done unless you can somehow create income from effort of some sort.

  2. 0
    0

    Reverse mortgages are the pits but available to the elderly who are desperate. Desperate seniors do not have enough for all the establishment fees, valuation fees and mandatory solicitor fees to vet their agreements, a cost which is paid upfront. Also they are limited on the amount they can borrow, around 40% of market value or something like that. One benefit for those who can is that they can payoff as much of the principle as they can afford to and this way they gain back higher equity of their home ownership. But, at the end of the day it’s simply capitulation of ones assets and the real winners are the financiers.

    • 0
      0

      Better to sell the house than to reverse mortgage

    • 0
      0

      I agree with Raphael here. I sold a house I owned outright once at a 35% discount to market price because a bank called in a loan and i could have lost everything. Dealing with banks needs wits and desperate elderly seldom have that at the time.

    • 0
      0

      I sold within the 48 hour window I had, in fact I sold within half an hour. I learnt a terrible lot though. As much as the house was worth in fact and I didn’t look back. I now tape every conversation I have with a banker, don’t deal if they can’t make eye contact and never sign anything until both my accountant and solicitor have had a jolly good look at it.

  3. 0
    0

    Hi Olga,’

    I would be pleased to assist with an interview at any time.

    Regards,

    Paul Dwyer
    Reverse Mortgage Finance Solutions


FACEBOOK COMMENTS



SPONSORED LINKS

continue reading

COVID-19

Concerns over limited data on how vaccine will affect over-65s

There are growing concerns that the vaccine expected to be given to the majority of Australians when the rollout starts...

Nutrition

Making healthy eating more affordable

Eating a healthy diet is crucial to our mental and emotional health as well as our physical wellbeing. It can...

News

Hands up who's in the club that is wrecking the planet

Alex Baumann, Western Sydney University and Samuel Alexander, University of Melbourne Among the many hard truths exposed by COVID-19 is...

Stylewatch

The most iconic handbags of all time

While countless clothing trends have come and gone, certain handbags have remained desirable across the decades, as coveted now as...

Health news

Health check finds Australia is stressed and obese

One quarter (25.6 per cent) of Australians undergoing a health check have been identified as at risk of developing diabetes....

Finance News

Financial planning costly and complicated, say review submissions

A review of the financial advice sector seeking to cut red tape and provide affordable advice could lead to more...

Diseases

Types of polyps and what to do about them

Polyps are clumps of cells that grow inside your body. While most polyps aren't dangerous, some can develop into cancer....

Finance

How SMSFs invested in 2020 - and what this means for 2021

The size of the self managed super fund (SMSF) market now represents one-quarter of the Australian superannuation industry and sits...

LOADING MORE ARTICLE...