How do you get a mortgage when you’re older?

15 February, 2023 | Alba Tebar

The first thing you should know regarding mortgages is that there is no limit depending on your age. In a word, the law does not establish an age limit for your mortgage. However, it is true that banks are the ones that will grant your mortgage, and they are usually not interested in giving them to older people. In fact, according to their risk policies, they tend to fix the age limit at 75 years-old. Above that number, you will find it quite difficult to get a mortgage to buy your dream-house.

But, why? The reason is very simple: the older a customer gets, the more probabilities that he/she dies before liquidating the mortgage. What’s more, if that person does not have any heirs to take care of his/her debt, the bank will have to seize the house and put it up for auction. And that situation is always a risk for them, because the borrowed money is not guaranteed to come back.

Anyways, not all banks are the same. Some of them offer special mortgages for older people, so you still have hope. They accept to take “the risk” of granting mortgages to customers who will be up to 80 years old at the time of finalizing the repayment of the loan.

The banks, in addition to the usual documentation, ask those clients who have a few years left to retire, a certificate from the state where they reside that proves the money they will receive in their retirement.

Furthermore, Hipotecasplus will help you to find the best mortgage you can get, regardless of your age. Our long experience in that field gives us a lot of tools to find the best mortgage for you. As intermediaries between banks and customers, we know where to look for the best bank for you, according to your personal needs, your personal preferences and your personal interests. And, besides, we will negotiate with the bank until we get what we want from them.

So, in that sense, if you are an older person but you really want to buy a new house, do not worry about it any more. Get in touch with Hipotecasplus’ Team and you will quickly find a solution for all your problems. With us, it is possible that everyone gets their dream house. We can assure we won’t let you down!

Requirements

As we have previously explained, there is no explicit prohibition for older people to get a mortgage. Nevertheless, one of the main requirements they will be asked for in order to make up for the age is liquidity.

On the other hand, being old and obtaining a mortgage has some advantages. We are talking about the lower interests you might experience if a bank grants you one. This is because, as well as having a lower mortgage term and a higher monthly payment, the interest rate that you’ll have to pay will be slightly reduced by banks.

Anyhow, let’s see which requirements you will be asked for in case you are older than 50 and are looking for a mortgage.

• Borrowing capacity. One of the most important things for everyone who wants to get a good mortgage is to have a good borrowing capacity. And no matter how old you are, this is a must for all banks. By “borrowing capacity” we mean the ability to assume debt without risking your economic position. In general, and especially as Banco de España suggests, the monthly amount of money you will be using to pay the mortgage, cannot be higher than the 35% of your income. In that sense, banking entities are aware that the older the applicant, the greater their debt capacity. This means that, by having less time to pay the loan, the percentage of income destined to pay the mortgage will be higher.

• Stable income. What retired people have as an income is their pensions. Unfortunately, those are usually not really high, even though they vary depending on the job you had. But, regardless of the fact that pensions are quite low, a lot of bank entities suggest that pensions are a stable source of income as valid as any other. In fact, even more stable, because nothing will stop you from receiving it. To clarify, pensions are the income that is collected punctually every month, so it is a strong security and regular income for all banks. They know for sure that this money will eventually come! In other words, some banks prefer this stable income over having a “theoretically” stable job, as long as there is always a risk, however small it is, that you are fired or that you have to close your self-employed business.

• Savings. As you may know, banks usually finance up to between 50% and 70% of the purchase price. They finance 70% if you are in the euro zone. If you are not in the euro zone it will depend on the currency in which you collect your income. Not anything more.To these amounts must be added the taxes and writing expenses that orientatively represent 10%. That is why it is so important to have some savings beforehand, because you will need them in order to pay the 30% – 50% left of the property’s value to be able to buy it. In that sense, seniors may have certain savings that can be used to pay that mortgage. At that point, it will be easier for banks to grant them mortgages, since the amount financed will be less.

Reverse mortgage

If we talk about obtaining mortgages for older people, we have to talk about the “reverse mortgage”. This is a type of mortgage that was created in order to encourage the granting of mortgages to older people. It is regulated by Law 41/2007, and it is based on a loan guaranteed through a property mortgage, as long as it is the applicant’s habitual residence. The requirements to be able to adjust to this “reverse mortgage” and obtain it are the following ones:

• Be older than 65 years old. You could ask for it if you are under 65 years old only if you have a disability of equal or higher than the 33%. Also, all those persons who are situation of serious dependency, are allowed to ask for it.
• Already have a house at your name
• Have heirs
• And last, but not least: that the loan does not exceed the appraised value of the real estate.