Does age play a role when applying for a home loan?
Home loan borrowers have to qualify for a variety of lending requirements imposed by banks and other lenders before they can avail of the loan. One of the major qualification restrictions is the age of the applicant.
The eligibility of an individual with regards to home loan often decreases when he/she is older than 40 years with less than 20 years of service remaining before retirement. As most home loans come with tenure of 20 years, lenders have to consider the retirement age during the approval stage.
Home loans and the maximum allowed age
In reality, home loan lenders should not discriminate borrowers on the basis of their age. It is however also their responsibility to make sure that mortgage borrowers have the capacity to repay the loan comfortably without any unwanted financial duress.
An age restriction was not present on home loans in the past. But, some current lenders have begun placing age restrictions ranging from 65 years to 75 years on home mortgages. This fact has thus made it harder for people to avail home loans as they grow older.
The reasons for unwillingness of lenders to lend to older mortgage borrowers
The most important aspect that home loan lenders take into account when checking the application for approval is the ability of the borrower to make timely regular repayments over the tenure of the loan. Regular income is one factor that can help determine whether a borrower can repay the monthly payments on time. Thus, retired individuals will definitely find it more difficult to convince banks to provide them with a home loan.
It is a known fact that most home loans come with a term of 20 to 30 years. Thus, a borrower who is 60 years old will not be able to repay the loan before he is 90 years old. This kind of risk is something that lenders are averse to take.
Tips to ensure approval of home loan
Listed below are a few tips that can help ensure that your home loan application gets approved.
- Ensure that your current debt level is minimal. Pay off all the current debt and make it as low as possible. This will help raise the likelihood of home mortgage approval.
- Some lenders need older home loan borrowers to have an exit plan in place. This helps them understand what a borrower will do with regards to repayments after retirement. One exit strategy can be the sale of some investments or real estate, etc.
- Older borrowers with a good credit history have a better chance of getting their home loan approved as opposed to those with bad credit. Hence check your credit report for any error and rectify them before applying for mortgage.
- Money in the bank savings account is often taken by lenders as proof of good financial prudence on part of borrowers. Thus, a large sum as savings will offer the necessary assurance to lenders to be able to offer credit.