If you are in your 50’s your probably in your prime (financially). Chances are you are earning more than you ever have been, but your closer to retirement than you ever have been and might be considering building your nest egg for retirement. But what’s the go with getting a mortgage when your 50+?
Although the banks and other lenders cannot discriminate against age, because of the Responsible Lending Code they must consider a lot of variables to prevent putting you into financial hardship – which includes assessing your risk when you are wanting to lend over 50. Part of that assessment involves is the Loan Term, your Assets Vs. Liabilities and your exit strategy.
Loan Term
In New Zealand, the standard loan term is 30 years, and the age that you are eligible for the NZ Pension is 65. Although we are seeing people working well into their retirement age the bank still needs to reassess your loan term. They don’t want to send you into retirement with an overwhelming mortgage while on a pension income. After 50 they start reducing the length of your term that you are eligible for. Each bank has different policy on the length of their loan term and it is assessed on a case by case basis. Some banks will give you a loan term up until you are 85, others will give you a loan term up until you are 75/80 – which is why it would be beneficial to talk to us about your options.
Keeping in mind, you still have several options to pay off your loan faster if you do not want to head into retirement with a mortgage.
Assets vs. Liabilities
The number of assets and liabilities you have, will start effecting your chances at getting an approval for a longer loan term. If you have multiple credit cards, personal loans and/or a large overdraft with minimal assets this will raise red flags with the bank. If you are 50+ they would expect you to have more security and less risk than that of an average first home buyer. To give you more buying power when your over 50 you are best to focus on decreasing any short-term debt that you have increasing your deposit.
Exit Plan
Linked with the assets vs. liabilities, the lenders will want to know your exit strategy. If you are going to be carrying a mortgage into your golden years, they want to know what your plan is, how are you going to cover the new debt if you end up retiring before the intended loan term? For example, are you going to sell down some assets, use your superannuation, downsize or use residual income to cover the mortgage? What is your plan?
Investment Properties
Lender’s generally view investment properties differently. Realistically, you could sell off an investment property at any time so it isn’t as higher risk as buying a home for you to live in. Lenders will still factor in these risk components but not always as intensely.
As always, if you are considering getting a mortgage we are here to help. We can talk through your goals, what your options are and how to achieve it. For peace of mind and to get the right advice contact any of our mortgage brokers today!