Are 40s and 50s too old to buy a house?

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Mature age borrower Case Study

IS 50 YEARS OLD TOO OLD TO BUY A HOUSE?

Carol and Jun (not their real names) are in their early 50s. Both are first home buyers and have been renting in Sydney for the last 10 years. They’ve always wanted to buy a home and have spoken to two brokers before they approached Maverick Finance about their chances of getting a home loan.  One of the brokers they spoke to advised them to come back when they have more savings. The other broker said they were too old to get a loan. When we spoke to them, we provided them with a strategy.

When we met the clients, they only had $22,000 in savings. They also had a few ongoing personal loans and credit card debts amounting to $30,000. These ongoing liabilities and their weekly rent are the main reasons for their low savings.  When we understood their financial situation, we came up with a strategy. The credit cards and personal loans needed to be consolidated into one debt. This will lower their repayments down to $424 allowing them to save at least $300 a month and significantly increased their borrowing capacity.

The couple were happy to buy a 1 bedroom apartment in Sydney for $600,000.  The purchase price will qualify them for the $10,000 FHOG and the stamp duty exemption. Because they’re both Australian citizens and first home buyers, they also qualify for the First Home Loan Deposit Scheme in which they don’t pay loan mortgage insurance.

In 2 months’ time, the couple was able to save an additional $8,000 which brought their savings up to $30,000.  With the 5% of $600,000 genuinely saved, the clients were ready to apply for a loan.  The loan for $570,000 was approved by one of the FHLDS participating lenders.  Once they got their pre approval, they found a 1 bedroom apartment in the suburb where they currently rent.  They put down a .25% holding deposit and we got their loan formally approved in 5 business days. They are due to settle this March.

We understand matured age first home buyers. Call us today for a complimentary assessment and chat with one of our home loan experts.

Can a mature age borrower get a home loan?

CAN A SHORTER LOAN TERM HELP ME GET A HOME LOAN?

Annie and Dan are first home buyers, aged 49 and 58 respectively. Annie earns more than Dan and is 9 years younger. For someone of Annie’s age, the bank is willing to provide a 20 year loan term with the assumption that Annie will be working until she is 70 years old. They have one dependent as their oldest child is 20 years old and working.  Because Dan is 58, an exit strategy is required. Fortunately, Dan has amassed enough super to assure the lender that the couple can manage the repayments even if Dan were to retire in 12 years until he turns 70 years old. 

Annie and Dan wanted to buy a new home for $800,000. But their borrowing capacity is affected by the 20 year loan term. The purchase price needs to be adjusted down to $700,000.  Both are first home buyers, Australian citizens with combined income of less than $200,000. This qualifies them for the First Home Loan Deposit Scheme. They have $50,000 genuinely saved.  With the $700,000 purchase price and a loan that qualifies for the FHLDS in which they can borrow as much as 95% of the purchase price with no loan mortgage insurance, we helped Annie and Dan get a pre approval for $665,000 with a lender participating in the FHLDS scheme. 

With an approval in principle in place, the clients started to look for properties they can buy within their $700,000 budget. They found two brand new properties — a 2.5-bedroom townhouse in Elara Marsden Park (to be built) or a 3 bedroom unit in Liverpool (already built and ready to move in). They chose the 3 bedroom unit in Liverpool because it is closer to where they work and it was moved in ready.

With the $700,000 purchase price, the clients had to give up the $10,000 First Home Owners Grant.  To qualify for the FHOG, the property has to be valued at $600,000 or below. They also had to pay a bit of stamp duty because the stamp duty exemption only applies for properties valued at $650,000 or below.

Annie and Dan put down a .25% holding deposit. We worked to get them a formal approval within 10 business days. With the formal approval and a spot in the FHLDS reserved, the couple put down a 5% deposit and exchanged contracts. They are now waiting on the certificate of occupancy and expect to live in their new home in March. 

The schemes and grants available to help first home buyers

HOME LOANS FOR MATURE AGED BORROWERS WITH CREDIT ISSUES

John and Mary (not their real names) are first home buyers in their late 40s. Both are scientists working in the healthcare industry. Mary just completed her doctorate’s degree. Because she was so busy completing her doctorate’s degree, she has few late payments on her credit cards and a payment default from 5 years ago. They have tried applying for a loan with one of the “big four” but were declined because of her low credit score.  The ‘big four’ often offer some of the most competitive interest rates, however they have the strictest credit eligibility criteria. This means that their home loans are only available to customers with a good-sized deposit, a stable employment history and a squeaky-clean credit history.

Fortunately, both applicants are on a high income exceeding $200,000 combined. Because of the credit default and late payments, Maverick Finance had to recommend a lender that specialises in clients with adverse credit.  In this instance, we had to look for specialist lenders that will assess each application on its overall merits. This means that if an applicant has a default or judgement on their credit report, the lender may still be able to consider the application.  The downside is the high interest rate. In this instance, the rate the specialist lender is offering is 6.49%. 

The clients had $50,000 in savings.  Apartments in the suburb where they live are priced at $650,00. To purchase at $650,000, they needed an additional $5,000 on top of their $50,000 savings. As soon as their savings reached $55,000, we helped the clients apply for a loan and got them an approval in principle. 

The clients did not qualify for the First Home Owners Grant of $10,000 because they bought an established unit. The $650,000 purchase price qualified them for the stamp duty exemption. The rate is high and their repayment is around $3,764 monthly. 

Defaults stay on credit reports for six years from the date the default was recorded. Knowing this, the applicants plan to refinance the loan in 12 months’ time to mainstream lenders and get a more competitive rate.  

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