First home buyers face so many challenges today. First is affordability. Prices of properties in Sydney and Melbourne have soared in the last 12 months. Other challenges include saving for the 5% deposit or even more and the amount of money that they need to borrow just to buy that first home. For first home buyers who are between the ages of 45 to 55 years old, the challenge is even greater. If you are one of those who feel you’ve been left behind and unsure if you can get into the property ladder, have a read of this blog.
Is 50 years old too old to buy a house?
Yes, it’s tough to get a home especially when you are 50 years old and over but there are ways. We just need to assure the lender that you have the capacity to service the loan even after retirement. In the past, people in their 60s retire. In Australia, the retirement age is when you are eligible for the age pension. But more Australians nowadays are working way beyond 65 or even working past 70 whether full time or part time.
With most lenders, there is a retirement rule to follow. The retirement rule is determined by the age of the borrowers and the loan to value ratio and type of home loan requested.
The borrower needs to show that they have the capacity to service the loan after retirement.
If the retirement incomes of the borrowers cannot support the loan, then other solutions may be considered such as sale of other assets or proceeds from superannuation. Another option is reducing the loan term.
How do lenders assess mature age borrowers or those above 50 years old?
Most banks nowadays will lend and provide a loan term up to when you reach 70. We have one lender that will lend to you until you reach 80 years old. This means if you’re 50 years old today, you can get a loan term of 30 years. Note that the longer the loan term, the lower the monthly repayment. We have a first home buyer couple in their early 50s recently. They just wanted a roof over their head when they retire. Fortunately, they work in roles that do not require too much physical effort. They’re in the customer service industry which means they work at their desks. The clients were able to get a 25 year loan term and with just a 5% deposit have bought an apartment using the First Home Loan Deposit Scheme.
Below is a list of questions that we mortgage brokers will ask you during our first meeting.
- When do you intend to retire?
- If retirement will happen before the end of the loan term, what is your strategy for servicing or repayment of debt following your retirement?
- Are you able to clear the debt prior retirement?
- Are there other assets that can be sold to clear the debt? I.e. an investment property
- Is downsizing an option. If buying a house, can you sell it and downsize to an apartment in 10 to 20 year’s time?
- Can your super lump sum cover the loan balance when you retire?
- Will there be enough left in your super after paying the loan balance that you can live on?
- Have you built up sufficient financial assets (i.e. superannuation, shares or properties) to be able to pay out the future home loan debt?
We’ve helped a lot of clients in their late 40s or early 50s purchase their first home. Speak to us today and we’ll find a solution for you. For a complimentary assessment, you can email us at mpapa@maverickfinance.com.au. You can book an appointment straight away at calendly.com/maverickfinance.