Older peoples borrowing power

[bob shovel]

Gday guys,

Family members have an issue coming up need to borrow some money. They are not investing or investors, PPOR only. It is needed for building repairs to their property.

With the following scenario how would they go borrowing ~$200k

Age: 58 x 2 married couple
PPOR: $1.2m
Current loan: ~$100k

They have plenty of equity available but what is the best way to get the cashola??

Would the loan serviceability be based on the remainder of their working life, is it up to retirement 65yrs?

Or can they just access their equity easily?

 

[datto]

They might qualify for one of those, What do they call it? Reverse mortgages or something. Bank gives you money at very low lvr and the loan is paid back from the estate.

 

[Terry_w]

If they are not working then no chance. If working then they may qualify.

 

[Mick C]

If they are working it's a done deal.

Not working no chance...unless you do a reserve mortgage ( However they need to be over 62-65 for that product type as well with most the big banks...)

 

[Redom]

Gday guys,

Family members have an issue coming up need to borrow some money. They are not investing or investors, PPOR only. It is needed for building repairs to their property.

With the following scenario how would they go borrowing ~$200k

Age: 58 x 2 married couple
PPOR: $1.2m
Current loan: ~$100k

They have plenty of equity available but what is the best way to get the cashola??

Would the loan serviceability be based on the remainder of their working life, is it up to retirement 65yrs?

Or can they just access their equity easily?

Accessing equity won't be too difficult - especially given the LVR will remain very low and there's lenders that don't have restrictions based on age. Sometimes it can be important to demonstrate an exit plan (e.g. downsizing, superannuation, etc).

As mentioned, so long as they can service the additional debt, shouldn't be a problem.

 

[albanga]

I do not like the reverse mortgage idea at all.
High interest rates (8% or so) and this just continues to compound and allows the bank to own more and more of an asset your family members worked their life to pay off.

I am sure the bank would sell it to people as "but the capital growth will pay off the interest" which is all well and good when there is growth! When my nan got really sick my pop did this to help pay for medical bills but this was a necessity! They could not access the equity via serviceability.
For a renovation, it is likely it is not a necessity, maybe some things are? But I would look at other avenues.

 

[Jamie M]

No need for reverse mortgage. If they can demonstrate serviceability then it will be a normal equity release. It might be at a reduced term.

$200k is quite a bit for repairs - chances are the bank is going to want to see all sorts of evidence (building contract, quotes, etc) if the purpose is repairs.

Cheers

Jamie

 

[Corey Batt]

They won't hit a problem with this at all because of age.

Depending on their lender, they may want to see evidence for the use of funds for that cashout amount, otherwise it may just breeze through.

What lender is this through?

 

[Harro]

If they are not working then no chance. If working then they may qualify.

Just wondering Terry can people use their "Super" in this instance. Say for example they were receiving a pension from their Super account can that be used to service debt?

 

[Corey Batt]

Just wondering Terry can people use their "Super" in this instance. Say for example they were receiving a pension from their Super account can that be used to service debt?

Super annuities/pensioners are acceptable forms of income, same with disability pension etc.

 

[bob shovel]

Thanks for the super fast responses

They are both and have quotes for repair works, plus solicitors and engineers involved! Its a big job that will not increase the property value! Just prevent the house from falling down onto the neighbours house!

Will the term of the loan be 25 years out will it shortened? Makes a big difference in repayments!

 

[tobe]

Thanks for the super fast responses

They are both and have quotes for repair works, plus solicitors and engineers involved! Its a big job that will not increase the property value! Just prevent the house from falling down onto the neighbours house!

Will the term of the loan be 25 years out will it shortened? Makes a big difference in repayments!

Some lenders might reduce the term of the loan, it depends on what income they receive and what other assets they have.

For instance, if they receive a self funded type pension, then the term could align with that of the pension. If they hadnt set up the pension yet, but could show they had enough in super to do such a thing, that would probably be ok too.

If they had nothing in super, and worked in manual type jobs (where the usual retirement age is 65 or less) then you might only get a short term loan, corresponding with their retirement age, unless they had another strategy (maybe downsizing at retirement etc).

Note some lenders are better than others with older borrowers, so the choice of lender will determine the amount of heartache and papperwork that needs to be supplied.

 

[Paul@PFI]

We often advise clients aged 55+ that its not wise to repay a loan in full. Provided there is a redraw facility you leave a residual debt to retain access to redraw for such cases.

Terminating a loan closes the account and it can be difficult to get approval - And costly for small amounts such as critical repairs

 

[wylie]

I'd just like to say I'm mightily offended at nearly 55 to be "nearly" an "older person"

 

[mystery]

I'd just like to say I'm mightily offended at nearly 55 to be "nearly" an "older person"

As you should be wylie, ..... I'm nearly 57 ..... Isn't the 50's the new "middle age" .... if not, then it should be ...

Mystery

 

[Ace in the Hole]

Thanks for the super fast responses

They are both and have quotes for repair works, plus solicitors and engineers involved! Its a big job that will not increase the property value! Just prevent the house from falling down onto the neighbours house!

Will the term of the loan be 25 years out will it shortened? Makes a big difference in repayments!

Any chance this could be covered under insurance?
Houses don't just fall down to that extent of costs involved.

 

[bob shovel]

I'd just like to say I'm mightily offended at nearly 55 to be "nearly" an "older person"

Wiser person?? what about a young Old person? no matter which way i go i can't spit out a good one

my basic understanding of insurance is you give them regular payments for an extended period...then you die. Its win win for them! But seriously, i have asked the question in another post and sounds unlikely, but hasn't been ruled out yet

 

[albanga]

We often advise clients aged 55+ that its not wise to repay a loan in full. Provided there is a redraw facility you leave a residual debt to retain access to redraw for such cases.

Terminating a loan closes the account and it can be difficult to get approval - And costly for small amounts such as critical repairs

This is brilliant advice Paul.

 

[bob shovel]

They won't hit a problem with this at all because of age.

Depending on their lender, they may want to see evidence for the use of funds for that cashout amount, otherwise it may just breeze through.

What lender is this through?

lender will be with the current building society

 

[bob shovel]

This is brilliant advice Paul.

This sounds like good advice to keep access to a loan when it may be difficult to get one! But isnt redraw just accessing money that is alredy yours? same as money in a savings account? Wouldn't you want the loan available to be able to borrow additional money on top of redraw?