Mortgage borrowing after 60: what solutions?

The vagaries of life do not always allow us to become the owner of our last primary residence before retirement age. Likewise, a retired person may wish to acquire a property to rent it out and increase their income. In both cases, a loan may be necessary to supplement savings. It is not easy to borrow from a bank after 60, such is the common belief. Yet solutions exist, read the guide!

A changing context

The first consequence of advanced age on a mortgage application will, of course, be increased caution from the bank and the loan insurance provider. Legislation, by lowering usury thresholds or applying a 9% tax on the death guarantee premium through the 2019 Finance Law, does not provide particular support to seniors looking to realise a property project.

However, increasing life expectancy means that at 60, a good slice of life still lies ahead! New projects often accompany retirement, which may involve property: rental investment, acquisition of a second home or the desire to prepare for later years by becoming an owner of a single-storey property. Banks have understood this and are less reticent than before about lending to retirees. Suitable loans for their situation exist today, making things easier.

Special criteria for the bank

The lender, when faced with an application from a senior and more generally from a person over 50, will examine several points:

• The level of resources, obviously.
• Does the applicant already own property or financial assets?
• Are they already retired? If not, what will their income level be thereafter?

It is common to experience a reduction in income upon retirement, with pensions rarely equalling the salary previously earned, even with complementary retirement benefits.

Some banks provide, in the event of retirement in the coming years, an amortisation schedule anticipating a reduction in monthly payments at the appropriate time. By thus accompanying the evolution of their client’s financial situation, the lender protects themselves against unpaid debts due to the difficulty of meeting repayments that are too high, but also supports the retiree’s standard of living. A winning arrangement for each party.

Furthermore, if the project makes it possible, applying for the shortest possible loan term should be favoured as the risk is reduced accordingly. It is for the borrower to decide, before any steps are taken, on the amount to borrow: a project financeable over 10 years while respecting the authorised debt-to-income ratio is more likely to be accepted than a 20-year loan. Finally, and as with any mortgage, a deposit will be welcome.

The borrower insurance, the holy grail of mortgage credit

The main difficulty for a senior’s loan, is finding insurance that will cover them for the entire loan term. As complications in repayment become statistically more probable with advancing age, they become a “high-risk” profile and it is common for adhesion to be refused by insurers. In some cases, cover is only offered up to a defined age.

No panic, specialised insurers now offer contracts that can accompany a senior borrower up to 80 or even 90! With of course suitable but not inaccessible rates and proper cover.

If you additionally suffer from health issues complicating your application, solutions still exist. Resulting from a 2006 negotiation between public authorities and financial institutions, the AERAS convention, for “Assuring and Borrowing with Aggravated Health Risk”, allows your file to be examined according to 3 levels of application review which can be summarised as:

• Good health allowing a guarantee proposal;
• At-risk health requiring detailed examination;
• Very aggravated risk, the file being then forwarded to a reinsurer.

The convention also allows old and cured pathologies not to be taken into account. If it is still not possible to borrow at this stage, doing without borrower insurance will be necessary, which is entirely possible!

The mortgage guarantee as a last resort

This guarantee, which places the acquired property as collateral for the loan repayment, replaces borrower insurance. It can be applied in two different ways:

• The guaranteed mortgage loan, limited to 70% of the acquisition amount. It costs significantly more than a conventional loan but otherwise avoids the insurance cost. In the event of repeated unpaid instalments or the borrower’s death, the bank can sell the property to recover the capital owed.
• The viager mortgage loan allows, if you already own a property, to borrow a sum of money by placing a mortgage on the property. This can allow the purchase of another dwelling, larger or single-storey for example. The bank repays itself by selling the property after the borrower’s death who may also proceed with early repayment.

Note that like viager sale, the viager mortgage loan is to be considered for people without children. Indeed, the viager concept implies the absence of transmission of the property to heirs following the person’s death.

Borrowing after 60 is entirely possible, multiple solutions are offered today. It may also be useful to propose that a close family member act as guarantor for the loan and can repay the capital in the event of death. All the more relevant a solution if it is the direct heir who would inherit the property. You are now armed and ready to consider the future!

You should also read: “Mortgage application: putting all the odds in your favour”