Can a 55+ year old get a home loan?
If you’re 55 or older and looking for a home loan or to refinance your existing loan, there are options available. However, you may have to jump through a couple of extra hoops to demonstrate you’ll be able to pay the loan back. If your loan term extends past retirement age, lenders will want to know how you plan to pay the loan back—known as an ‘exit strategy’.
How to get a home loan if I’m 55 or over
If you’re 55 or older, you’ll need to prove to your lender you can repay the loan just like any other borrower. This will include what you plan to do if you’ll be retiring before the end of the loan term.
Darren Moffatt, Managing Director of Seniors First mortgage brokers, told Canstar that under the National Consumer Credit Protection Act (NCCP), you have to show evidence of sufficient income, not just that you have plenty of assets.
“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.”
What do lenders look at for over 55 home loans?
Your lender will likely assess:
- Your income: Lenders will assess your income, including what you already receive or may receive from your superannuation or pension.
- Your financial position: As well as your income, lenders will also assess your savings, investments, and existing debts.
- Your credit score: Lenders will look at your credit history to judge your reliability as a borrower. You can check your credit score for free here.
- Your exit strategy: As an older borrower, you may have to show your lender you have a plan to pay off the loan once you retire. For example, you might have to pledge you’ll downsize to a smaller property or hand over some of your savings once you retire.
“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,” National Seniors Chief Executive Officer, Chris Grice told Canstar. “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?
If you’re an older borrower in Australia, most lenders will likely ask you to agree to an exit strategy. This is a plan for how you’ll pay back the loan later on.
“These days anyone over 45 will be asked for one by the lender,” says Mr Moffatt. “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.”
Pledging to downsize or sell other investments like shares may also be acceptable exit strategies.
Best home loans for over 55s
Whatever your age, finding the best home loan means comparing lots of different products to find the one that best suits your situation. Even if you’re over 55, you might still find several lenders willing to give you a loan. You’ll need to consider the interest rate, fees and charges, the loan term, the exit strategy requirements, among other factors, to see what could work for you.
Since it can be harder to find a lender when you’re over 55, it might be a good idea to contact a mortgage broker, who could unlock options you wouldn’t be able to find yourself. If you’re concerned, ask them directly about their experience dealing with older borrowers.
Tips for getting a home loan when you’re over 55
- Use a broker: Since it can be harder to find a lender when you’re over 55, it might be a good idea to contact a mortgage broker, who could unlock options you wouldn’t be able to find yourself.
- Save a bigger deposit: The bigger your deposit, the less you’ll need to borrow, which could help your chances of approval. A deposit of 20% or more will also generally mean you don’t need to pay Lenders Mortgage Insurance (LMI).
- Come up with an exit strategy: Generally the older you are, the more important your exit strategy will be to your chances of being approved.
