Is there an age limit for home loans?

What’s the oldest age for a home loan?

Regardless of your age, lenders need to make sure you can afford to repay the loan - so their priority is minimising their risk. 

Generally speaking, lenders view mature mortgage applicants - 55+ years and older - as a higher risk, and consequently have stricter lending requirements. Their main concern would be if the length of the loan - or loan term - extends beyond your retirement age. Lenders will need to know how you plan on meeting repayments when your income stops after retirement. A lender’s assessment of your ability to repay a mortgage or home loan is known as your serviceability. 

Understanding serviceability and lender criteria

The serviceability criteria a lender sets are there to make sure you can afford the mortgage and to assess how much debt you can manage. A serviceability assessment typically occurs just before a lender runs a credit check on your loan application. Your serviceability is calculated based on four major elements, namely your:

• After-tax monthly income
• Living expenses or outgoings
• Existing debt commitments 
• New loan commitments (the home loan amount you are applying for)

Lenders also add a buffer into your home loan interest rate, in case interest rates rise in the future. 

Let’s now look at the key features of a loan you need to consider.

Home loans for mature borrowers: what to look for 

Like anyone looking at home loans, if you are older you need to make sure the product suits your circumstances, specifically the following key features:

• Interest rate: the higher the interest rate the more you end up paying over the life of the loan, so it makes sense to look for the lowest rate possible. 
• Fees: all the fees and charges attached to a loan - like the application fee, settlement fee and redraw fee - all add up, and impact the overall cost of your mortgage.
• Flexibility: if you are able to make additional repayments you will be able to pay off your loan quicker and minimise the interest you pay, which is important if you are close to retirement.
• Offset or redraw: home loans with features like offset or redraw can both help to reduce the interest payments, so you can pay off the debt faster.

Let’s now look at how you can maximise your chances of getting approved for a loan, as a mature borrower.

How can mature borrowers increase their chances of approval?

If you are a mature borrower there are some steps you can take to increase your chances of getting your loan approved. 

The biggest factor is to demonstrate a strong retirement strategy, namely how you plan to service the loan once you retire, if the loan term exceeds your retirement age. This is referred to as an exit strategy. Acceptable retirement strategies could be:

• Sale of investment properties, apart from your owner occupied property, to help pay off the loan by retirement. 
• Accessing superannuation to pay off the loan by retirement.
• Reduction of the loan balance via amortisation of the loan to a serviceable level using post‐retirement income.
• Downsizing/sale of owner occupied property to pay off loan by retirement.
• Accelerated repayments on the home loan to pay it off sooner than documented maturity/before retirement.

If you are a mature borrow you can also:

• Minimise how much debt you have, particularly of unsecured debt like credit cards and personal loans.
• Make sure your financial affairs are in order, with no outstanding payments or tax debt.
• Find out your credit score or rating, which will give you a good idea how lenders will view you from a risk perspective.
• Save for the largest deposit you can, to limit the size of your loan. 
• Minimise your daily/weekly outgoings or expenses associated with your lifestyle.

You should now have a good overview of borrowing conditions for mature applicants. 

Also be aware that we realise you may prefer to speak to us, rather than go through the online application form. We assign each caller their own personal consultant to answer all your questions and more!

Have more questions about mortgages for mature applicants? Get in touch and our team is happy to chat at a time that suits you!

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