Over 60s Mortgages

I read a number of articles this week that mentioned 40% of pensioners (and over 60’s) are currently renting and that the number is only going to increase as more and more people rent property. This was not limited to Australia but the U.K. as well and with most 30+ age group either still at home or renting, a rising property market is causing ever increasing numbers of people to rent.

While the Government and mortgage companies offer deals and opportunities for younger people to get on the property ladder there is nothing being done for those who are retired or nearing retirement. If you do not own your own home by the time you turn 60 then unless you break into your Super account by formally retiring (assuming you have a decent retirement pot) and purchase property, then renting is the only option.

Looking at the market for 60+ mortgages if you have retired, then an income stream from a pension fund does not seem to be considered like a salary income would be and very few companies offer mortgages for people in this position. So why are mortgage companies helping younger people and not those who are 60+?

It would seem to me that if mortgage companies are willing to provide mortgages for investors and buy-to-let customers on an interest-only basis, then why aren’t more companies offering this same deal to over 60’s? The over 60’s customer, by paying the interest-only payment, would effectively be paying rent (to themselves) while living in their own home and hopefully see a gain on their property value in years to come. Similar rules could apply in providing a decent deposit (20%-40%) so that the mortgage lender would be covered as far as security and owning an interest in the property and once the property is sold (in the event of death) then the entire interest-only portion could be returned to the mortgage company and the remaining equity in the property would go to the estate. The other benefit to the retiree is that equity from your own home doesn’t impact the age pension asset test.

My wife and I are currently retired and renting on the Gold Coast and rent a 3-bed townhouse (at $580 per week) between the coast and the hinterland. We would like to purchase a 2-bedroom apartment overlooking the coast but are finding that prices are at least $600,000+ which would take up a big chunk of our pension pot. If we were able to obtain an interest-only mortgage, then assuming we put down $300,000 as a deposit and borrow $300,000 on an interest-only mortgage at 4.5% interest rate then the monthly interest-only payment would be $1,135 per month. As it is, our only alternative would be to rent on the coast at a minimum of $700 per week, or $3,033 per month!

Perhaps this is something the industry could consider as I’m sure there is a market there (40% renting and increasing) and would provide retirees with additional funds in order to live in their dream home while using the funds in their pension pot to pay back the interest-only ‘rent’ and live a more comfortable and secure lifestyle on the remainder.

Steve

QLD

8 comments

 

I think it would be very hard for someone over 60 to get a mortgage these days to be quite honest.  However it would be discriminatory for a lender to rule you out due to age so I believe.  If you had a large enough deposit and had a good credit rating maybe you could get what you want.  It is hard to say....best to go and check with your bank/credit union as to what your options are.

 

Ha!

I tried when I was around 68 and already retired. I consulted my Credit Union about the possibilities. The manager laughed at me and honestly admited that I "was too old for the stuff" and no bank would ever lend me money to buy a house.

Despite a having a super of around $ 240000.00 and age pension I as not "secure" enough for this...

In the meantime I keep feeding the landlords...

Banks will let you pay off a mortgage till you are 75.  Maybe shop around, or try a broker.  It used to be 70.

It is best to have your home paid off by the time you retire...a lesson for those coming behind us.  Otherwise you are at the mercy of greedy landlords.

We had sold our house to travel in our Motorhome. Unfortunately circumstances changed and we had to get a home loan. The process was painless and we had no issues. We are 69 and 63 and both work, the mortgage will be paid off in 30 mths, and that is allowing for things going belly up. 

The gentleman who started this post says they are both "retired";  if both working I can fully understand  being given a loan.

Good point Radish

Steve, a bank will always look at a loan application on its merits. All you need is proof of your ability to service the debt. Think in terms of cash flow and security of that cash flow. Forget about age it's not an issue. But you also need to do your calculations on a P &I repayment not Interest Only because the banks are under pressure to reduce the number of IO loans. 

This is from Canstar dated 22 April this year.

 

Can a pensioner get a home loan?

There are still home loan products out there for pensioners looking to buy a new home, but you may have to look beyond the usual traditional lenders. Pensioner home loans offered by non-traditional lenders come in a variety of different product types (see below).

Getting approved for a home loan as a pensioner can be considerably more difficult than the usual process. The main difference between pensioner home loans and other home loans is that borrowers can expect a pensioner home loan to charge a higher interest rate due to the higher expected lending risk.

Lenders tend to view pensioners as a higher-risk borrower due to their life expectancy and the fact that their incomes are typically much lower on average. A pensioner’s age also stops them getting a home loan in many cases, as traditional home loan terms tend to be around 20-30 years.

An older borrower will have a much more limited life expectancy and is therefore at a higher risk of passing away before the loan can be repaid.

Lenders also usually place a higher degree of scrutiny on a pensioner borrower’s credit score and credit history, so the borrower could face more difficulty getting a loan if they have a history of failing to meet previous loan or credit repayments.

Data updated 22/04/2018

I wouldnt take too much notice of that Rad. A lot depends on your history with a particular bank and your ability to service the debt regardless of whether or not you are working. As I say, its all about cash flow. And your question to yourself.. would I lend me money?

To their credit Canstar dont want to send a whole bunch of pensioners running into the bank.

This reminds me of a book I read. Cant remember the name. This extra terrestrial comes to Earth looking for intelligent life. He returns and is asked by his superior for his report.

To which he replies, "they have these things called banks on Earth, which supply money to people. But there is something odd about this behaviour by these banks?

Prompted to continue he goes on to say..

The people need to prove that they dont need the money in order to receive it. And another thing, the banks dont give you money to buy food if you're hungry, only other things you dont really need."  

Related imagethat explains it well

Thanks to everyone who's commented - some very useful information.

8 comments



To make a comment, please register or login

Preview your comment