Home loans for over 55s

If you’re 55 or older and looking for a home loan, there are options that may be available to you, so long as you can convince a lender you can make the repayments. The aim is to make sure you don’t take on a loan you can’t afford, and can’t pay back.

There could be many reasons why you want to take out a home loan when you reach 55 or more. Maybe it’s for your first home, or to refinance your existing home; a move elsewhere in the neighbourhood or a chance for an adventure somewhere new.

But just like any potential homeowner, a lender will want to know that you have the means to service the home loan. That means you may face more of a challenge than a younger person, though Otto Dargan, the Managing Director of Home Loan Experts, told Canstar that lenders are not allowed to discriminate against age.

How to get a home loan if I’m 55 or over

No matter what your age, lenders are required to make sure they conduct responsible lending when considering a loan. That’s according to the National Consumer Credit Protection (known as the National Credit Act or NCCP) legislation.

It’s up to lenders (as a credit licensee) to decide how they meet those responsible lending obligations, says the finance regulator, the Australian Securities and Investments Commission (ASIC).

“The key concept is that credit licensees must not enter into a credit contract with a consumer, suggest a credit contract to a consumer or assist a consumer to apply for a credit contract if the credit contract is unsuitable for the consumer,” AISC says.

While the NCCP may offer you some protection, Seniors First mortgage brokers Managing Director Darren Moffatt told Canstar the Act can also place some restrictions on your ability to borrow for a home loan.

“It’s not enough to have heaps of equity in your property or to be ‘asset rich’,” Mr Moffatt says. “The NCCP demands lenders demonstrate you have the income to also service the loan. Some people who have not borrowed money for many years get caught out on this.”

Essentially, what a lender needs to know is that you will be able to repay the loan in full, including with any agreed interest, fees and charges. It might be wise then to make sure you have all your financial affairs in good order, including any relevant paperwork or documentation that you can show a potential lender. That includes details of any existing debts and savings or investments you may have.

One of the things a lender will likely look at is your credit score, which gives an indication on how good you are as a borrower. You might want to check your own credit score beforehand – which you can do for free with Canstar – to see if you need to make any changes to improve your score.

As part of that credit check, National Seniors Chief Operating Officer Chris Grice told Canstar you might want to see if you have multiple credit cards or store cards, especially ones you no longer use.

“If seeking to get a mortgage, don’t have dormant (but still valid) credit or store cards that are in your name or partner’s name as that can have an impact on borrowing capacity,” Mr Grice said.

The same goes for any multiple super accounts you may have if you intend to tap into those funds as part of any mortgage repayment plan.

“Instead of using the funds just for funding retirement and or aged care, superannuation is being more frequently used to pay-off mortgage debt later in life. If this is the case, you need to have a good superannuation strategy in-place – don’t have multiple accounts paying more fees than necessary and where you can contribute extra to superannuation, do so as early in life as possible.”

Do I need an exit strategy for my home loan?

With home loans for seniors, most lenders will likely ask you to agree to an exit strategy – a plan on how you intend to have any home loan repaid – especially if you run into difficulty.

“Make sure you have an exit strategy,” says Mr Moffatt. “These days anyone over 45 will be asked for one by the lender. Acceptable exit strategies can include having enough superannuation to clear the mortgage when you retire, or enough equity in a secondary property which can be sold when the time comes.”

An exit strategy may include a requirement to have the loan repaid by the time you reach a certain age, say 70 or 75. Given many home loans are usually to be repaid over a 25 to 30 year period, if you’re 55 or over that means you may be expected to repay the loan over a shorter period of time. That will then push up the amount you’d have to pay in regular repayments, which may not be acceptable to you or your lender, and may see your application rejected.

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How to find home loans for over 55s

If you’re 55 or over and looking for a home loan then you might have to shop around to see what various lenders have to offer.

You can use Canstar to search for various home loan options in your state or territory, whether you’re looking as a first time buyer, to buy your next home or looking to refinance or invest. You can further refine your search to see what may be available, before you make an approach to any potential lender.

You might want to consider seeking help from a mortgage broker as they may be able to explore more options that might not be readily available to you. It might be wise to ask any potential broker what experience they have helping people aged 55 and over to find a home loan.

It might help if you can save for a deposit of at least 20% of the purchase price of the property you’re interested in. Most lenders will require you to take out Lenders Mortgage Insurance (LMI) if you need to borrow more than 80% of the purchase price. This helps them recover their money should you get into trouble and aren’t able to make the repayments but note, LMI doesn’t cover you if you can’t make the repayments.

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What are the best mortgages for borrowers over 55s?

Finding the best home loan when you’re 55 or over means finding one that best suits you, your needs and your finances.

Several lenders may be prepared to offer you a home loan but you need to consider things such as the interest, any fees and charges and the duration of the loan. You need to compare what’s on offer to see what could work for you.

Again, Canstar can help you narrow your search for a home loan. You may even want to consider those lenders Canstar regards as offering outstanding value for home loans, fixed rate home loans, refinancing or loans as a first time buyer.

When considering any home loan offer from a lender make sure you read carefully any relevant documents, such as any terms and conditions, Target Market Determination (TMD) or Key Facts Sheet (KFS).

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