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Australian First Finance

Are you over 50 years of age seeking a  home loan?

10/4/2018

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How to increase your chances of Home loan approval

When applying for a home loan, banks and non-bank lenders impose variety of lending criteria and all have different policies in place that must be met before qualifying for finance. These include a stable income, proof of genuine savings, current debt, superannuation, current assets, good credit history​.

But what about your age?​

​Are there any restrictions on the age at which you can take out a home loan?
And what effect does age have on your borrowing power? ​

What is the maximum home loan age?

There’s no widely accepted maximum age limit at which you can qualify for a home loan. Australia’s anti-discrimination legislation, namely the Age Discrimination Act 2004 and National Consumer Credit Protection Act 2009, prevents lenders from discriminating against mortgage applicants due to their age.
“However” lenders also have a responsibility to ensure that anyone they lend to can comfortably afford to repay the loan without experiencing any undue financial hardships. With this in mind, the older you are, the more difficult you might find it to obtain home loan approval.
In the past, Australian lenders did not place any age limits on their mortgages. However over the past couple of years a number of lenders, have introduced limits on their home loans to borrowers over 50 years of age loans, there for reducing the loan time allowed up until retirement.

What does this mean and how does this affect you?

​By reducing the time span on a home loan from 30 years down to retirement age this increases your loan repayments considerably this in turn makes it harder to service a loan and can cause undue stress on the borrower.

Why are lenders reluctant to lend to older borrowers?

​Lenders are not allowed to discriminate based on age under the Age Discrimination Act 2004 and National Consumer Credit Protection Act 2009 however you still meet their lending criteria. This is based on your capacity to make timely repayments over the life of your loan with the loan term reduced considerably. The most important factor lenders take into consideration is your ability to pay off a home loan in a timely manner based on your income, it will take some work to convince the lender that you will be able to service the loan. And you do not present an unacceptable level of risk to the lender.
If you’re an older Australian and you apply for a home loan, the lender will assess your application in the same way they would for an application from an 18-year-old or a 38-year-old. “If” you have your finances in order and can demonstrate your ability to repay the loan, your application can be approved.

If you feel you are being discriminated against you can contact AFCA click here for the link or call 1800931678 to discuss your concerns they are there to help you.


How to get your loan application approved

While it is more and more difficult for older Australians to get home loans approved, it’s certainly not impossible. Keep the tips and advice below in mind to help maximise your chances of having your mortgage application approved:
  • Exit strategy. Most lenders will require the borrowers over 50 to supply a home loan exit strategy, this basically outlines what will happen to the home loan when you retire. And how you intend to pay down debt upon retirement. In addition to the usual information required in the application process you will also need to show how you will continue to pay off your loan during retirement. For example, you may need to sell an investment property to pay down your debt.
  • Minimise debt. The amount of debt you have is a very important factor a lender will take into account when assessing your loan application. Pay down existing debt before you apply to increase your chances of approval.
  • Save a bigger deposit. The more money you have saved, the more money the bank will be willing to let you borrow. If you can display proof of genuine savings and regular financial discipline, your borrowing power will increase dramatically.
  • Credit history. Are there any black marks on your credit file?
  •  Provide more financial evidence. If you’ve successfully repaid a previous mortgage, including this in your application will show that you’re a reliable borrower. A sizable superannuation balance can also help to convince a lender that you don’t pose an unacceptable lending risk.
  • Ask an expert. The most important piece of advice for older Australians hunting for a home loan is to ask a mortgage broker for help. A broker will be able to help you find the lender and loan most suitable for your needs, and can offer advice and assistance on how you can put together the best possible loan application to present to Lenders.



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    Author

    Liane is an extremely experienced and down to earth Mortgage Broker. She has a very personal approach to determining your wants and needs, and matching them to the right finance structure.

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