Are you aware of mortgage age limits and restrictions when it comes to buying a property? A survey by Roy Morgan states that the average Australian intends to retire at the age of 61, while 2014 the average age was 58. This change has happened due to economic and living uncertainty, which has forced the average Australian to work longer than previously.
Mature borrowers are often unaware of mortgage age limits and restrictions when they apply for a mortgage, and banks pose a number of restrictions on their borrowing capacity.
For example, if you’re over 40, lending institutions may offer a relatively shorter payment term. This is done to recover the loan payment before a borrower reaches the retirement age, i.e., 65. Therefore, it is very important to have a well-defined exit strategy if you are over 40. To make your life easier, find a lender who understands mature borrowers and deals with them on a regular basis. This is where we can step in.
Most of the lending institutions consider your application if you are able to provide convincing evidence for repayment of debt before you turn 75. Suppose, a loan of $500,000 has a mortgage term of 25 years. If you are 55 years old, it is highly likely that the loan term will be reduced from 25 to 20 years.
Banks usually need a written exit strategy by a qualified financial planner if your home is the only security to back your debt. However, there are a number of lenders who may not accept downsizing to a smaller home when you are about to reach retirement.
Below we’ve stated the rules for different banks regarding mortgage age limits and restriction in Australia.
In order to qualify for a home loan, an applicant who is 50 years old or above must have an acceptable exit strategy, such as term deposits, superannuation, investment properties, or other investments. In the case of no exit strategy, the loan period must not extend beyond the retirement age of a borrower. AMP consider 70 years to be the age of retirement unless a financial planner or an applicant advise otherwise.
If an exit strategy of an applicant is downsizing to a smaller home, he or she must present a detailed plan that shows purchase price, expected sale, and timeframe.
ANZ requires an applicant, who is 55 years old and above, to provide an acceptable exit strategy. He or she must also have a reasonable amount of cash reserves, superannuation, or other types of investments for debt repayment. The bank does not accept applications for downsizing.
Bankwest and Citibank
In the case of Bankwest, an applicant is required to have sufficient superannuation funds or any other kind of investment to cover the loan amount. He or she should provide evidence of the same as well. However, there is a need to have an effective exit strategy if a person wants to avail longer mortgage term. Moreover, downsizing is not considered by the bank.
Citibank, on the other hand, scrutinises applications on a case by case basis. If an applicant is over 50 years old, he might not get reduced payment terms or he might get relatively reduced loan term. But it depends on the exit strategy of a person or the purpose of a loan.
Macquarie and NAB
Macquarie allows a maximum age limit of 70 years. If an applicant is over 55 years of age, he or she must provide an exit strategy as well.
Similarly, NAB also requires an exit strategy, such as superannuation, investment properties, savings, or other investments. But it does not accept future inheritance and downsizing applications.
St. George Bank and Westpac
Age policy does not apply to an applicant if they are over 55 years old. However, the St. George Bank needs an exit strategy from an applicant to be qualified for a loan.
In the case of Westpac, borrowers are required to pay off the entire loan amount before they reach the age of 75. If the application contains multiple securities, a person must also provide an acceptable exit strategy. If an exit strategy is not strong enough, the bank may have to reduce loan terms.
Mature borrowers must always fulfil all the pre-requisites and find a lender that offers reasonable terms in order to avail mortgage loan. If you’d like to have a chat about your current circumstances speak to our team at Hunter Galloway now.