Are you too old to get a mortgage?

How old is too old to get a mortgage?

Technically, there is no answer to this question: depending on your situation, you may be able apply for a home loan whether you’re 18 or 78.

"With current discrimination laws, lenders cannot discriminate on a borrower’s upper age," explains www.homeloanquestions.com.au.

"Normal conditions apply with regard to repayment capacity and equity, however, so if a lender was aware that a borrower was unable to understand responsibilities under the loan contract, they may not approve a loan."

In practice, too, lenders have to be sure that you can reasonably repay the loan. If you’re 45-50years of age or over and you can’t demonstrate how you will be able to repay a 30-year loan, there is a good chance your application will be knocked back.

After all, your bank wants to know that you can repay the loan in full ­– and while a 45-year-old full-time employee constitutes a good risk, a 75-year-old is a different kettle of fish.

The GFC has changed the playing field. Thanks to 100% and 105% loans, once freely available and now banished into nonexistence, there are thousands of property owners throughout Australia who have homes that are worth less than what they borrowed.

In the past, the fact that you were buying a property was enough assurance for the bank. If the worst-case scenario was to arise and you could no longer repay your loan, the lender could always sell your property to recoup their losses.

These days, however, banks are no longer willing to rely on the fact that you can sell your property to repay your debt.

And the National Consumer Credit Protection Act, which came into effect in 2010, complicated matters even further.

The Act was created in an effort to make lenders responsible for verifying the customer’s financial situation, particularly their capacity to pay without "substantial hardship".

Essentially, banks were being held more accountable for their lending practices, but it did come with a price to consumers. Those most at risk of being declined for a mortgage are:

• Older borrowers (aged 45-50 and over)
• Self-employed
• Pregnant women
• Applicants with high levels of personal debt

If you fall into any of the above categories, it would pay to ensure you home loan application is in tip-top shape before submitting it to a lender – or you risk receiving a big fat "no" on your credit application, and on your credit file.

This article was written in 2011 and updated for content and clarity in June 2018

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