by Australians are stepping onto the property ladder later in life but older buyers have to jump through hoops to convince banks to put them on their loan books.
The average age of first-home buyers is 38 and with house prices climbing faster than incomes many borrowers aren’t able to enter the property market until their 40s or 50s. Our ageing population is also contributing to the growing army of older borrowers.
Allan Faint, director of Home Finances Centre of Australia, says borrowers purchasing or refinancing a home in their 40s or beyond need to provide lenders with extensive information to prove they can service the mortgage.
“With an older a borrower, lenders will put a greater focus on the proof of income to service the mortgage, not just now but over the life of the loan,” Mr Faint says.
“Nearly all banks require borrowers over 50 to have a retirement exit strategy to show they definitely have the capacity to make the mortgage repayments.”
Prepare your paperwork
This can include proof of substantial superannuation or investments and other income that will continue after retirement, as well as evidence of income, expenses, employment, assets and liabilities.
“Lack of superannuation puts older borrowers under greater scrutiny when purchasing and refinancing property,” Mr Faint says.
“Most banks will require an owner-occupier in their 50s to show enough superannuation or assets to cover the loan so that if they get into trouble at retirement they will be able to use their super to pay out the loan balance.”
Never too old for a mortgage
The Age Discrimination Act prevents lenders and brokers from treating older home loan applicants differently from younger buyers, and the big four banks say there are no age restrictions or health assessments for first-home buyers.
Mr Faint believes more lenders are recognising the emphasis should be on an applicant’s capacity to repay rather than their age.
“I don’t think banks have become tougher with their lending criteria for older buyers in recent years and some even appear to have reduced the age for requiring exit strategies,” he says.
More lenders now specialise in mortgages for senior borrowers and a broker can help home hunters access these niche banks.
There is also room for a different range of living options which can make it financially viable to buy a house later in life.
Property data shows more seniors are buying houses with their children and living in dual-occupancy houses. They are also living with adult children who are carers and assisting with mortgage repayments.
Mr Faint believes it’s never too late to buy a property as long as you plan for various stages and financial challenges in your life and consider affordable housing options.
“Be realistic about what you can afford, look outside the big housing markets such as Sydney and Melbourne and think regional or the more inexpensive capital cities such as Hobart and Adelaide.”
Top Tips
Demonstrate a good savings history such as a share portfolio or other investments
Show a sound borrowing history
Show proof of income
The bigger the deposit the more willing banks are to lend
Have a defined exit strategy
Search for a specialist lender
Consider buying with a family member
Consider regional markets for affordability
Retirement age can vary between lenders
Be sure the mortgage suits your circumstances