Understanding lending restrictions if you’re buying later in life can help you get the right result for your next mortgage.
Looking to take advantage of the latest hot deals in home lending? If you’re over 55, certain lending criteria can rule you out as a borrower with some lenders and types of loans. So if you want to refinance, read on and find out how to maximise your chances for a successful application.
Why age can work against you
When you take out a mortgage, you’re agreeing to make regular repayments over the life of the loan. And that term can be as long as 30 years. So if you’re approaching retirement and in the market for a new mortgage that you expect to be paying off well into your 80s, it’s possible that some lenders will knock you back.
Although your home acts as security on the loan, if the worst happens your assets could be passed to another family member. And when it comes to recovering the principal of your loan, your lender will always be seeking to minimise risk and expense and avoid getting caught up in the settlement of your estate.
And making mortgage payments can become tricky if your retirement income falls short of what you need to cover your costs. Lenders may be concerned that making regular mortgage payments might become a challenge for you.
Keep your credit status spotless
That’s why you can reassure lenders by having your financial affairs in order and being prepared to bare all. You’ll need to share your plan for honouring all your financial commitments – before and after retirement.
So what can swing the decision in your favour? Here are some of the things that can have a positive influence on your loan application:
- Having a healthy deposit – or a large amount of equity in your current home – will be seen as a positive by some lenders.
- A good borrowing history – making repayments on time for previous home loans or other types of debt.
- A generous super balance – having enough in your super to provide a reasonable retirement income. This threshold will depend on your circumstances, including your current age and expected retirement age.
- Discuss your exit strategy – if you have a plan for paying off your mortgage early, be ready to share the details with potential lenders.
Equity release – a good idea?
As part of their preparation for retirement, sometimes people plan to supplement their future income by drawing on the wealth they have in their homes. This can be a good strategy for giving your pension a modest top-up or to provide the funds you need to adapt your home to make it comfortable as you grow older. But if you’re looking to access your equity make sure you’re aware of the commitment you’re making and consider getting financial advice before taking steps to refinance.
Speaking to an accredited broker can help you discover which lenders are more likely to offer you a refinancing deal in your later years.
Are you over 55 and looking at refinancing your home? Tell us about your experiences in the comments below.