Loaning to people over 65 years old was traditionally considered risky and insolvent. Older borrowers were, therefore, awarded mortgages rarely. However, the previous decade has experienced a change in perspective for most mortgage providers. Lenders have recognized some reasons to increase borrowers’ maximum age limits. These are:
1. Increasing life expectancy – People are more likely to live past their retirement ages.
2. High house prices – This means that many people opt for a longer repayment period.
3. The age at which couples get children is on a constant rise – More people prefer to own a home later in life.
The above reasons coupled with little wage growth and increasing average age of first-time buyers have necessitated lenders to loosen borrowing requirements. Such lending policies lead to questions about the sector’s viability and profitability in the long run.
The increasingly popular high age mortgages indicated a growing confidence of risk-averse financiers. Building Societies Association, through a report, “Lending into Retirement” recommended that mortgages lasting into retirement were better in supporting older people. The increase in age limits is particularly beneficial to the older people. Thus, they enjoy benefits including:
1. Borrowers over 65 can purchase up to 75 percent of the home’s value.
2. Older borrowers who experienced difficulty in getting mortgages can now be guaranteed even into their pension years.
3. Mortgages make home ownership affordable. As more people continue earning into their sunset years, more individuals can own homes.
4. A mortgage is a cost-effective method of purchasing a home. Increasing age limits of borrowers will ensure that more people afford a home.
On the other hand, an increase in age limits can negatively impact on the sector’s stakeholders. Some of the disadvantages of such policies are:
1. House prices will remain high. Since more people will be in the market for homes, an increase in demand is inevitable. Higher demand than supply will only keep the housing prices high.
2. Extended loan periods. The nature of mortgages is that they span over long periods. More mortgages will result in more people carrying massive debts over extended periods of time.
3. The danger of losing a home. A mortgage’s loan security is the home in question. However, failure to pay up the mortgage instalments can result in loss of the security. With more people accessing mortgages, more people are likely to lose their homes.
It is clear that increasing maximum age limits for borrowers will be an opportunity for many in the market. However, its consequences are severe. To make a prudent decision on whether or not to get a mortgage loan will depend on the income of the borrower. Values such as home value, loan amount and interest rates must be pre-determined. A mortgage calculator is an essential tool in making this choice. Information on the current loan variables, credible advertisements are available online.