Table of Content
The bank will likely want you to demonstrate how you plan to repay the loan with an ‘exit strategy’, the source and quantum of your retirement income and any assets you could sell to repay the loan if necessary. Richard Whitten is an editor at Finder, and has been covering home loans and the property market in Australia for the last 4 years. He has written for Yahoo Finance, Money Magazine and Homely, as well as multiple banks and lenders. Richard has a Certificate IV in Finance and Mortgage Broking, a Bachelor of Education from the University of Sydney and a Graduate Certificate in Communication.
However, some high street lenders still insist on a cut-off age of 70 or 75 but there is now increasing flexibility for older borrowers with Nationwide and Halifax extending age limits into the eighties. There are several community financial assistance programs that provide personal loans to borrowers who are in the low-income bracket, such as pension payments. The end use of such loans is highly restricted and can only be used to pay for household goods and essential items. In the event of secured debts such as a reverse mortgage, the lender can take over the secured asset when you stop making the repayments and sell it to recover the dues. If the reverse mortgage is on a joint account, then the surviving borrower is responsible to pay off the debt.
What are the risks of getting a home loan as a senior?
I haven’t been able to find any specific government programs to support older Australians in your circumstances. How rent-to-buy scheme OwnHome is giving struggling renters a chance to become homeowners.
The bottom line is simple -- home loans for pensioners may be an uphill battle if you only consider traditional lending institutions. Most banks and financial institutions consider such borrowers to be extremely high-risk due to a lack of stable cash flows. The real estate sector had started seeing gradual recovery across key property markets, driven primarily by end-users, however, the repeated rate hikes may impact the interest rate-sensitive sector. Low-interest rates have been the biggest factor in the resurgence of real estate demand in the last few years and hence the rate hike would mean a hurdle in affordability. However, there is a positive sentiment, as affordability and disposable incomes of new-age homebuyers are much better than in the past.
Find the right home loan now
If your loan term extends into retirement, the lender will want to know how you intend to finance repayments. This is known as an exit strategy and it details how you will pay off your housing loan without incurring financial hardship. Responsible lending rules require lenders to be very cautious if there’s a risk of the borrower facing hardship.
Similar to the standard shared ownership scheme, this allows eligible applicants over the age of 55 to purchase a share of a home, up to a maximum of 75%, and pay reduced rent on the remaining part. To safeguard for the future, you might want to consider arranging a power of attorney to help deal with your mortgage affairs should you become unable to. Alternatively, you could discuss your situation with a broker who will advise the best route to take.
Seniors Home Loans FAQs
Make sure you have a reliable exit strategy in place to protect against unexpected complications. Just like any other type of home loan, the interest rate that applies to an over-55s mortgage has a big impact on how much you will have to pay over the life of the loan. A borrower can claim tax deductions under Section 80C of the Income-Tax Act, for paying the home loan insurance premium. Because there’s no requirement to repay, you don’t need to comply with the retirement age policy or prove your income. No repayments are required and the interest capitalises until the property is sold.
Yet taking a joint mortgage where one of the borrowers is retired might not work as the age cap will be applied to the oldest person on the application. You might be fine though if the other applicant can show they can cover the mortgage by themselves. For example if someone bought a house for a dependent relative such as a parent, even though they won't live in it. Since the introduction of the rules a number of lenders have extended age limits for paying off mortgages. A combination of age limits, new affordability rules and rising house prices means that it may be difficult for older borrowers to borrow as much as they'd like. There are plenty of options available to borrow when you’re older.
Bear in mind that the age of the borrower and equity ownership in the house also impact the loan amount. Typically, the loan amount can be up to 1.5 times the maximum pension the borrower is eligible to receive. Total Home Loans are a national mortgage broker with whole of market access.
How much you will be eligible to borrow depends on the pension you receive and your expenses. A popular home loan for seniors receiving disability pensions is to opt for a low-deposit home loan. Such loans allow you to borrow up to 95 percent of the home equity.
As an example, if you borrow £50,000 on interest-only, at the end of your 20-year or 30-year mortgage term, you’ll still owe that £50,000. With a lot of mortgages, younger borrowers are able to get up to 90% Loan to Value – which means a 10% deposit. But an older borrower could be looking at a maximum of 75% or 80%, meaning you could need a 25% deposit. A higher deposit means lower monthly payments and better interest rates.
We pay all utilities or other costs fortnightly to ensure all accounts paid. If you're trying to get a home loan in your 50s or 60s, the guidance of a mortgage broker can really help. Click 'Enquire Now' to fill out a form and speak to a mortgage broker today. It’s not easy getting a mortgage as an older person, but with the right advice it’s very possible.
When it comes to borrowing home loans, age is not always a barrier. We may charge a typical fee of up to 2% of the amount of the loan for arranging a mortgage. I needed a mortgage incorporating forces help to buy and government help to buy. The users should exercise due caution and/or seek independent advice before they make any decision or take any action on the basis of such information or other contents. Use your existing savings to increase your stake in the house you are purchasing.
Instead, you may need to use your superannuation payout or the sale of an investment property to fund your exit strategy. For example, if you’re 55 when you apply you should manage to fall within the majority of providers’ lending parameters. If you want a 25 year repayment plan, you would have to find a lender with a minimum mortgage term end age cap of 80. There are various options available in the market you can look into.
No comments:
Post a Comment