50 is the New 40: Unless You Want a Home Loan

When it comes to home ownership, we hear a lot about Millennials unable to save for a house deposit and spending their days gorging on avocados. But some Baby Boomers don’t have it so easy either.

Mortgage for 40-year-olds: is it possible to get a 30-year loan?

Amid decade-high interest rates and seemingly ever-increasing house prices, many Australians are buying their homes later in life.

While it can be trickier for older Australians to get home loans, it's not impossible. In 2019-20, people aged 35-54 made up 35.3% of recent first home buyers. Close to 10% were aged 45-54.

There is no age limit on home loans and age-based discrimination is illegal. But when you apply for a mortgage, your age will be considered among many key criteria; you need to prove you can pay a mortgage now and into the future.

So, if a lender feels confident you will repay a loan, they will lend to you at a mature age.

Some lenders require you to have an 'exit strategy' - a plan for paying out the loan after your retirement. Exit strategies can include downsizing a property or using superannuation to pay off your house.

Am I too old to get a home loan?

work out your borrowing capacity on a standard 30-year loan term. That means, if you’re 70 years of age, there’s a fair chance you won’t be around in 30 years’ time to finish paying off your 30-year loan.

While that probably isn’t too hard to digest, some buyers might be surprised to hear that a high-earning 55-year-old might also be rejected for a home loan based on the same rules. While applying for a home loan later in life is acceptable (not to mention far more common these days due to divorce or death of a partner, downsizing/upsizing and snowballing median property prices), the older you are, the harder it will be to get approval for a loan.

While it’s illegal to discriminate against someone based on their age, people need to realise they must be able to pay the loan back during their working lifetime.

Even if you’re 45-50 years of age and you can’t show how you will be able to repay a 30-year loan, there is a good chance your application will be knocked back unless you can provide an exit strategy.

Are you at risk of mortgage stress?

When you apply for a home loan, lenders apply a 'stress test' accounting for interest rate increases. But when there are sudden hikes as we've seen recently, mortgage stress can impact many households.

As interest rates continue to rise, over
are at risk of mortgage stress with a further 1 million 'extremely at risk.' A number higher than the 2008 global financial crisis.

The number of mortgage holders considered ‘at risk’ has increased by 766,000 since the RBA began increasing interest rates in May 2022, according to Roy Morgan research.

Many households are in stress and do not have enough income to cover mortgage repayments and other living expenses.

In July, the Australian National University estimated if rates hit 4.6%, Australians will pay 40% of their income into mortgages and other loans.

Here are some tips when facing mortgage stress:

  • Consider refinancing your home loan to potentially reduce your rate or consolidate debts.
  • Review your budget to see if there is any wriggle room to cut back on spending.
  • Build a savings buffer if possible. Keeping this in an off-set account could help reduce your repayments.
  • Have a mortgage exit strategy if you are a mature buyer.
  • Contact a financial counsellor. Call the National Debt Helpline 1800 007 007.

How different generations search for mortgages

successful in purchasing property, it’s assumed they’ve borrowed more than they should and will never be able to pay back their home loan.

Certainly, data taken from UNO’s platform between June and August 2017 shows just over half of all people who searched for
or higher. 43% searched for loans larger than their maximum borrowing power.

Interestingly, the data shows it’s not

The blight of the baby boomer

One reason for this is that baby boomers (those born between 1946 and 1964) tend to be more confident – even over-confident – when it comes to buying property in Australia. It may be because they’ve been through a time when owning a home was the normal state of affairs, rather than an unachievable goal like it is for many young people today. In the mid-90s, almost 70% of Australians in their 30s and 40s owned a home, according to the Australian Bureau of Statistics’ Survey of Income and Housing. Today, it’s closer to 31%.

“For many people in that generation, they’re so used to
going up and up that they just can’t imagine them ever going down, or even flattening,” says UNO founder Vincent Turner.

“They’re sitting on veritable gold mines which makes them over-confident when it comes to purchasing further homes as they expect them to increase substantially in value as well.”

How UNO can help

A UNO Broker can help buyers of any age find the best deal on their home loan. With access to over 20 lenders and persoanlised support, we can find the right deal for you.

UNO are even equipped to deal with complicated inquiries.

We once helped a couple with unsecured debts from loans taken out for a wedding and a car. One of the customers had recently became unemployed and found themselves in arrears.

With a final notice from their bank saying the home would be repossessed, they sought debt consolidation to get ahead on their finances.

A UNO Broker found this couple a specialized lender who let them refinance at a lower rate. The couple were also able to consolidate half their unsecured debts, making room in their budget to pay the rest down.


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June 21, 2024
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