Am I Too Old to Get a Home Loan?

One of a property lender’s most important jobs is to make sure a borrower can manage the typical home loan term of 30 years. This becomes even more critical from the age of 50, because that 30-year term can see a borrower well into retirement.

We have a retirement age in this country of 67, and yes, a lot of people work past that. But the banks want to make sure that, when someone does retire, they can meet that mortgage and they’ve still got somewhere to live.

Lenders are obligated to assess whether a loan will place you in financial difficulty.

Is There a Home Loan Age Limit in Australia?

It’s clear that a lender can’t refuse a loan application purely based on age.

Federal government legislation like the Age Discrimination Act prevents such blatant bias. However, under the responsible lending laws, a lender must ensure that every home loan application it approves makes sense and doesn’t place borrowers in financial difficulty.

The legislation is there to protect the client — to make sure that the client is always protected in any situation, whether it’s age or not.

Tips for Older Borrowers Applying for a Loan

While you're never too old to get a home loan, you can take these extra steps to put your best foot forward.

Keep Your Credit Score High

Lenders use your credit score or rating, together with their own risk criteria, to decide if you’re a safe bet. According to moneysmart.gov.au, your credit score is based on:

• How much money you’ve borrowed

• The number of credit applications you’ve made

• Whether you pay on time

What can affect your score?

• Credit cards

• Utility bills

• Personal loans

• Bankruptcies

• Debt agreements

• Court judgments

• Personal insolvency agreements

Tip: It could be worth engaging a broker before you approach any lenders.

Watch Out for Buy Now, Pay Later

These services count as credit applications and can affect your credit score.

What they’re saying is: “Buy this now, pay it off later.” But in reality, those instalments register as credit hits, which may reduce your borrowing capacity.

Engage a Broker

If you plan to shop around for a home loan, it can help to go through a mortgage broker. Do the research before you apply to avoid unnecessary credit hits.

Plan Your Exit Strategies

Lenders need to understand your exit strategy if your loan term extends beyond retirement age.

For example, a 49-year-old planning to retire at 67 has 18 years to repay their loan using regular income. A lender will calculate what the loan balance will be at 67, then assess:

• The value of your assets

• Your likely super balance

• Whether you’ll be able to service or clear the remaining debt

Downsizing is a common strategy for older borrowers. If your home increases in value, you may be able to sell it, repay the loan, and buy a smaller home outright — with super left for retirement.

It’s in everyone’s interest to ensure the borrower is protected. That’s why lenders must ensure the borrower has:

• Steady income

• Reasonable equity

• A strong credit score

Lenders do assess individual situations but apply extra diligence when the borrower is older.

Case Study

A 54-year-old male, having relocated to Australia and built up equity in his home, was looking to refinance and consolidate debt. He felt confident in his ability to make repayments and had a plan to downsize in retirement while using his super.

The first lender he approached declined the loan — they weren’t comfortable with his exit strategy, due to a requirement for a minimum amount of super.

Sometimes lenders have internal caps or limits for certain borrower profiles. This is not unusual — it happened, for example, during the tightening of investment lending in 2021.

Fortunately, a second lender reviewed the same application and quickly approved the loan. They accepted the downsizing plan and the super balance, and they recognised the substantial equity in his home. They were confident he would be able to repay the loan.

Source: Domain