Getting Finance at a Mature Age
There are many reasons why a person may need to apply for a home loan later in life. Whether due to a separation or divorce, refinancing to a better deal, unlocking equity for renovations or even as a first home buyer, it’s not uncommon for applicants to be over 55 years of age or beyond.
Of course, it stands to reason that most mortgage holders will not want to carry the burden of a home loan after retirement and lenders ideally will also want to have a debt repaid before the applicant leaves the workforce. However, as everyone’s circumstance is difference and all lenders have their own unique policies, there is the capacity for many to obtain a home loan late in life if certain requirements are met.
Given that an applicant in their 50’s or 60’s is unlikely to qualify for a standard 30-year term the new loan term will likely be only for the remainder of their working life. This in turn will impact the amount able to be borrowed. Conversely, if the loan term being applied will be greater than the applicant’s proposed working life, then they must demonstrate an acceptable “exit strategy”
What is an exit strategy?
An exit strategy relates to how the borrower intends to repay the debt after retirement. There are several potentially acceptable exit strategies you may propose with your lender. These include:
- Downsizing of the property – This would involve an intention to sell the property upon retirement and use the sale proceeds to purchase a smaller property.
- Superannuation– If your superannuation balance permits, you may be able to make a lump sum payment from it to clear the remining debt.
- Selling an asset – If you hold an asset such as property or shares that may be sold to clear the outstanding balance this may be acceptable.
- Passive income – Passive income streams such as rental income, dividends or annuities may be acceptable to service the loan after retirement.
For the lender to accept your exit strategy you will have to provide acceptable documentation such as super statements, share portfolio statements or even a letter from a financial planner to support your proposal.
Each lender has their own unique policy for mature applicants and each applicant brings with them their own unique set of circumstances, so it is imperative to partner with an experienced broker to ensure you get the optimum solution for your requirements.
Talk to one of our mortgage experts today for more information.