Summary: Can I get a 30 year mortgage at 60 years old?
| Details | Description |
|---|---|
| Customer | Kay L – a single applicant with stable employment, good income and a clear credit history. |
| Mortgage broker | Pramesh Vaidya |
| Purpose | To get approved for a debt consolidation home loan and get a better interest rate. |
| Loan amount | $383,622.00 |
| Security | $750,000 – NSW |
| LVR | 51.15% |
| Interest | 3.24 % p.a. (variable, principal & interest) |
| Problem(s) | Not many lenders accept a 60 year old borrower (retirement age rules) especially so when the property in question is on a company title. |
| Solution | Providing a solid exit strategy based on her financial position and goals. As well as finding a lender that has flexible lending policies for mature borrowers, one that accepts company title properties, and offers a competitive interest rate. |
| Takeaway | Can I get a 30 year home loan at 60 years old? Yes, you can. |
The story
Pramesh Vaidya, one of our specialist mortgage brokers first spoke with Kay over the phone and discussed everything she wanted to achieve by refinancing her home loan.
Kay’s objectives were:
- To refinance her current home loan.
- To find a lender that will accept debt consolidation.
- To find a lender that will accept a company title property as security.
Kay’s requirements were:
- To get a competitive interest rate on her new loan, i.e. better than her current rate of 3.49% p.a.
- The ability to make extra repayments with a redraw facility and a 100% offset account.
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The problem
Over the course of a couple of conversations with Kay, our broker identified all the potential credit issues that could see Kay’s home loan application knocked back, and there were quite a lot of them.
The credit problem as identified were:
The property being refinanced was on a company title
Simply put, a company title gives you a share in the company who owns the block of flats or units you live in. For example, if you own shares 1001 to 2000 then you own unit 2, so it is by who owns what shares as to who owns which unit.
The problem is that the majority of lenders see a company title property as an unacceptable form of security for a home loan.
Only a few lenders do and they tend to limit the amount they’re willing to lend, i.e. the maximum is 60%-80% loan to value ratio (LVR).
Applying for a home loan as a 60 year old
Most banks and lenders are more often than not likely to decline a 60 year old for a home loan due to their age.
Only in specific circumstances will lenders consider a mature borrower past the age of 60.
Moreover, Kay wanted to get a home loan with a 30-year loan term so as to lower her repayments early on.
This meant that Kay would be 90 years old when the loan term ended!
Debt consolidation with a credit card overlimit
Kay had a laundry list of credit card debts that she wanted to consolidate to her home loan. She planned to have no other debt apart from the home loan after settlement.
In total, her credit card debt balance that she needed to consolidate came to $36,564.00.
Usually, if there is sufficient equity in the property, debt consolidation is not a big issue.
However, the problem here was that one of her credit cards was over-limit, this is an issue as it signals to a lender that the borrower may be struggling to manage their finances.
Working behind the scenes
Once our broker Pramesh recognised that refinancing the home loan and consolidating the credit card debts, would put the customer in a better financial position, he went to work.
Firstly, he collated all the documents required such as identification docs, income docs, living expenses assessment, home loan statements & credit card statements etc.
After poring over the documents, and performing a full assessment, our broker had a holistic view of the entire deal, he was confident that he could meet all of Kay’s objective and requirements with this loan and more!
The challenge
Among the few lenders that accept a property with a company title, the challenge was to identify a lender with flexible lending policy for mature borrowers, and one with a great interest rate.
And that’s exactly what our broker did.
Applying for a home loan as a 60 year old
Since no lender will give a 60-year-old borrower a loan term of 30 years without a solid exit strategy, Pramesh together with Kay developed one that made sense and was acceptable to all parties.
The exit strategy used was a combination of:
- Downsizing to a smaller property once retired;
- Approximately $200,000 in her superannuation, which she can use to pay off the loan once she retires (if required);
- She planned to retire at the age of 70 and would be making extra repayments on the loan so that it will be paid off before she retires.
Debt consolidation with a credit card overlimit
Provided there is enough equity in the property (everything else being equal) debt consolidation is usually accepted by a few lenders.
However, considering the complexity of the deal, and with a credit card over-limit, not taking any chances, Pramesh got directly in touch with a lender to explain the situation and to ensure that the loan application gets through to approval.
Since Kay was kept up to date with her application process, once our broker got the green light from the lender, he made his recommendation, which Kay gladly accepted.
As a final point of note, Kay also had Westpac credit card with a $0 balance and a limit of $10,000. She closed this credit card to help boost her borrowing power.
Only after ensuring everything checked out, the home loan application was submitted, and a pre-approval was obtained in under a week.
She got a great variable interest rate of 3.24% p.a. (principal & interest) with no monthly or annual fees.
The outcome – A happy ending
When it was all said and done, Kay got everything she was hoping for:
- Got a better rate on her new loan by 0.25% or 25 basis points;
- Consolidated all her credit card debt into the new home loan; and
- Got a 30-year loan term.
- The loan product came equipped with a 100% offset account, redraw facility, extra repayments etc. at no extra cost.
Are you in a similar situation?
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