What is the maximum age for a home loan?
With average home loan term being 30 years and retirement age of 65, are banks cautious lending you money once you're past your mid-30s? Not quite – but age can impact your loan approval.
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There is no maximum age limit set for getting a home loan – in fact, people aged well into their 60s and even older may be approved for a home loan. But when you apply for a mortgage, your lender will assess many criteria, and age can be one of them. Let’s take a closer look at how your age can affect your borrowing power and your chances of being approved when looking for a home loan.
What is the maximum home loan age?
There’s no widely accepted, industry-standard 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 money to can comfortably afford to repay the loan without experiencing any undue financial hardships. With this in mind, the older you are, the more criteria may apply when you are trying to obtain home loan approval.
In the past, most Australian lenders did not place any age limits on their mortgages. But in the past couple of years a small number of lenders, including Bank of Queensland and loans.com.au, have introduced age limits on some of their home loans. Where maximum age limits apply, they typically range from 65 to 75 years.
Why are lenders reluctant to lend to older borrowers?
Lenders are not allowed to discriminate based on age, but they still need to make sure you satisfy the usual lending criteria. This is based on your capacity to make timely repayments over the life of your loan. The most important factor in your ability to pay off a home loan is the income you earn, so if you’ve already retired or planning on retiring in the next few years, you will need to convince the lender that you will be able to service the loan (ie make the repayments) even with no income coming in from your job.
The lender also needs to be certain that you will be able to pay the loan off. When you consider that the typical term of a home loan is 30 years, a 65-year-old applicant could potentially be within sight of their 100th birthday before they’ve paid off their loan if they take out a 30-year loan. This could present an unacceptable level of risk to the lender.
That doesn't mean you won't be able to get a loan 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.
Once you reach 65 years of age or older, obtaining mortgage approval grows increasingly more difficult.
How to get your loan application approved
While it is more difficult for older Australians to get home loan approval, 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. Lenders often require older borrowers to supply a home loan exit strategy, which basically outlines what will happen to the home loan when you retire and no longer have a regular income. In addition to the usual information required in the application process – income, assets, liabilities etc – you will also need to show how you will continue to pay off your loan during retirement. This might be dividends from an investment, the sale of another asset (such as an investment property) or a lump sum payment you're expecting to receive.
- Minimise debt. The amount of personal debt you have is a crucial factor a lender will take into account when assessing your loan application. Pay down as much existing debt as possible 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. Banks may be nervous about lending money to an older borrower who has a very small deposit, and they won't be sure of your ability to pay off the loan.
- Sort out your credit history. Are there any black marks on your credit file? Improving your credit history can drastically improve your chances of obtaining home loan approval, so find out what you need to do to increase your credit rating.
- 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.
Get help from a broker
If you're having difficulty finding a lender who will accept your application because of your age you could talk to a mortgage brokers. Brokers are experts who can really help borrowers in unique circumstances.
You can get in touch with a mortgage broker on our broker guide page.
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