Age is becoming a real issue with most lenders.

Did anyone else see this article in today's Sydney Morning Herald. It could create some problems with people in their 50's who want to get into the property market. I suppose it was only a matter of time.

See below .....
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A mortgage adviser at Smartline, Karen le Comte, says age is becoming a real issue with most lenders.
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Borrowers in their 50s, or even late 40s, are being asked to show how they will fund their loan past retirement.

She says they are increasingly being required to demonstrate an exit strategy from their home and investment loans to get a loan approved and the once widely used strategy of simply selling the property to pay out the remaining debt is no longer acceptable.

Lenders want to see there is a comfortable level of extra money to ensure the debt can be paid out.

She says lenders are also being more strict with the loans granted to older borrowers, reducing the loan term from 25 or 30 years to 15 or 20 to ensure it is paid out.

Has something changed? The tougher stance is being attributed to the responsible lending requirements of the National Credit Code, which came into effect earlier this year.

Le Comte says lenders now ask for evidence of how the borrower will pay out the loan on retirement or death, using the code to explain their decision. The code requires lenders to ensure borrowers can afford to service their loans.

Le Comte says lenders are being especially tough with older borrowers seeking home loans. Investment loans are also subject to the code but she says they are less of a problem.

She says when borrowers want to withdraw equity from their home to invest, lenders are also being more vigilant. Borrowers are now more likely to be required to provide a statement from their accountant, or recommendation from a financial planner, to prove the equity is being withdrawn for genuine investment purposes.

How do I ensure I won't run into problems?

Le Comte says it is important to tick all the right boxes when you apply for the loan.

She says borrowers should be able to demonstrate they have a stable history of employment and ensure they have recent copies of their superannuation statements to show they have money they can access in retirement and have the cash flow to make contributions now.

She says low exposure to consumer debt such as credit cards and personal loans also goes down well. ''It's nothing for people in that age group to have $50,000 owing on credit cards,'' she says. ''But if you want to apply for a mortgage you should get it down.''

Le Comte says lenders look at the number of credit inquiries that have been made about borrowers. ''If you have four or five credit cards, plus store accounts and so on, you'll generally have an active credit file and banks that use credit scoring tend to be opposed to that,'' she says.

''Keep those sorts of debts down unless they're a necessity. Even a phone call to ask about credit can prompt an inquiry, though borrowers often don't realise this when they agree to it.''

She says lenders expect older borrowers to have money in the bank and possessions that reflect their age and earning history.

If you don't have a strategy for paying off the loan before retirement, you will need to show you have money in other assets, such as super or shares, to pay out the debt.

Le Comte says older borrowers need to be aware of the stricter requirements and get advice before applying for a loan. ''If you've already been declined for mortgage insurance, for example, it will make it much harder to apply for the loan with another lender.''
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Mystery
 
Hey Mystery

Good to have you back after a while :)

What you've quoted is exactly what Bill Zheng was saying earlier this year. As baby boomers hit retirement, banks will not lend to them without an exit strategy which means prices in the 'baby boomer - mid ring suburbs' will not ride high as refinance will be difficult.
 
An exit strategy is to sell the larger property and to buy a smaller property or even to rent

Lenders do not require to see how you are going to pay out the loan with earnings, savings, superannuation etc

They simply just want to make sure that borrowers have thought about it, then they can tick that box and that's the end of the matter

Lenders cannot discriminate because of age but they do have to show that they have acted 'responsibly'

Whatever that means

A bit like love, actually.

Cheers
 
So more a caring thing :).

I would have thought that in tough times, banks would be concerned with LVR and income potential in all age groups.
 
It's not about age...it's more about responsible lending and education; ie does the client know what to expect when they near retirement...and have they planned for it.:)

To be honest; it's always been like this pre-National Credit Code;

Regards
Michael
 
Yes...probably true....

In Sydney...places like Castle Hill, West Pennant Hills, Cherrybrook, Wahroonga, Gordon, Thornleigh, Pymble, Bella Vista are going to be subrubs which will probably be hit.

These suburbs have McMansions which are not as attractive nowadays.

Will be interesting to see how this plays out. The funny thing is the older homes which are 120-140 sqm on blocks less than 600Sqm will become popular as these are easier to maintain. So are 3 bedroom townhouses and villas.

The change is subtle.....but will be really pronounced by 2020!

As for finance....one option is to swap securities ...that way no reassessment is required.

Hey Mystery

Good to have you back after a while :)

What you've quoted is exactly what Bill Zheng was saying earlier this year. As baby boomers hit retirement, banks will not lend to them without an exit strategy which means prices in the 'baby boomer - mid ring suburbs' will not ride high as refinance will be difficult.
 
OK....and I would assume that this would also start closing.

Personally I find the new CCC laws a Royal pain in the Ar$e!!!

I guess they are there to protect the other 99.5 of the population who has no idea.

What I also find interesting is the people on this site doing large borrowings or developments with finance. Will be interesting to see what happens there....in 2008 and the early 90s some banks refused to extend credit past a certain point. Will be interesting to see how this plays out!


Usually, but not always.

With some lenders a port can be credit critical

ta
rolf
 
I am finding some deals that I wouldn't have thought twice about being inappropriate are now being viewed in a different light. I think property prices being flat or declining in many areas is seeming to make more of a difference, perhaps more so that the nccp rules themselves.

I also know the attitude of potential borrowers is currently not aligned with credit assessors opinions of their capacity to repay! Especially those with equity and those used to years of relatively loose credit.
 
What I also find interesting is the people on this site doing large borrowings or developments with finance. Will be interesting to see what happens there....in 2008 and the early 90s some banks refused to extend credit past a certain point. Will be interesting to see how this plays out!

Banks will always lend money to good clients and good projects. It's the try-hard developers with 5% equity and want 95% of hard costs and land funded that will be the first casualties (as always). Similarly with normal residential loans - now banks get a bit picky with bad credit hits or some arrears in an existing home loan. The good borrowers won't have a problem, NCCP or not.
 
A lady I work with, age 50 was recently knocked back on a 25 year loan, bank only happy to give her a 20 year loan.

She was questioned about her exit strategy...
 
Age is definitely an issue, but it comes down to responsible lending.

We recently got a loan for clients who are 74 years old and expected to retire in the next 2 years. The loan is dependent on their income for affordability.

In the application we were able to show a clear strategy to pay off the loan at the time of retirement. We were also able to demonstrate that the clients would have a self sustaining income during their retirement.

The new laws can be tough, but they are workable.
 
Although hubby is now in that 50+ bracket, so we may have to jump thru some extra hoops, I think the new rules are quite reasonable and logical.

Probably helps that we have the means to show our exit strategy and have already thought it through.

Fair enough - if you're investing money with a long term payment scheme, you want to know that they can pay you back over that long term. Although the average Australian does sell and move house every (is it?) 7 years ... either up, down or sideways.

I suppose some of us who seem to move every 2-3 years pull that average down tho.
 
Although hubby is now in that 50+ bracket, so we may have to jump thru some extra hoops, I think the new rules are quite reasonable and logical.

The rules don't really make that much sense to me. It is the lender who is taking the risk by lending the money out to the client, and it is therefore ultimately up to the lender to decide whether it is appropriate or not. From what I've seen NCCP just creates more paperwork and duplicates the checks that banks would normally as part of any loan application - and results in far more loan declines because banks are scared of getting criminal prosecutions for taking a normal business risk.
 
because banks are scared of getting criminal prosecutions for taking a normal business risk.

ah - didn't realise that bit. So someone who doesn't plan their mortgage exit strategy can sue the bank for not ensuring they had one?

That bit is stupid. I thought it was more the banks covering their backsides and protecting their loans.
 
ah - didn't realise that bit. So someone who doesn't plan their mortgage exit strategy can sue the bank for not ensuring they had one?

That is right lizzie. If the bank did not take appropriate steps (according to NCCP) to ensure that the loan was 'not unsuitable', the entire loan can set aside by the courts. This sort of thing used to only happen with third party guarantees/mortgages (think Amadio v CBA or Garcia v NAB) but now it's extended to every single residential loan.
 
.... someone who doesn't plan their mortgage exit strategy can sue the bank for not ensuring they had one?....

Hey Lizzie

All this is not just about the lender. It is also about the other party in the deal, the borrower.

Even if you are a single person who is 58 and buying your first home and relying on the FHOG to settle the purchase and you have only your very ordinary day job for income, you can still get a 30 year mortgage loan

Your Exit Strategy can be (a) to die, or (b) to sell the property when you retire, or (c) make extra payments now to reduce the balance of the loan to bring the payments to within servicing of your anticipated retirement income - even if that's the pension, or (d) pay out the loan with your superannuation, or (e) you expect an inheritance, or (f) you intend to sell the property in five years and go and live with your Sister, or (g) whatever you like!

What that 'Exit Strategy' actually is is not up for judgement, just that somewhere in the application you tell the lender that you have given some passing thought to what you will do in seven years time when you retire any may still have a mortgage over the property

Obviously, a mortgage over your 'home' is quite different to a mortgage over a holiday house or over an investment property

Last time I applied for my own (30 year) mortgage, my Exit Strategy was to 'cull the herd when I deem the time to be right' (sell of some property to reduce the debt over other property) which the assessor thought was quite funny and certainly an acceptable strategy.

Mr Lizzie, at 50+ is still but a boy. No doubt all your previous mortgage loan applications have been well prepared, so no reason to think that your next one / future applications would be any less well prepared and presented to the lender.

Be alert but not alarmed!

Your days of access to 30 year mortgage loans are not yet numbered!

Cheers
Kristine
 
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