A mortgage for a pensioner who dreams of having his own home is sometimes the only way to implement his plans. Age can make it very difficult to apply for a loan to buy an apartment or build a house. Age limits are against the senior, but he can effectively convince the bank of his stable life and financial situation. What conditions must be met to obtain a mortgage for a pensioner? How long can the loan be counted on? What documents do the lender require? We answer!
Banks see seniors as reliable, honest and economical customers. Constant and regular income makes them willing to provide them with cash loans, loans, renewable limits or other credit products with a relatively short financing period. However, with long-term liabilities, due to the age of retirees and the associated risk of non-repayment, financial institutions apply stricter rules.
Borrower’s age and mortgage
Currently, banks grant mortgage loans for a maximum period of 35 years. People who are already retired must be prepared for a much shorter repayment period. The older the pensioner, the shorter the funding period he can get. In practice, the age limit imposed by the bank is decisive. It provides a kind of security that the borrower will pay all his debt during his lifetime. In most banks, this limit is 70 or 75 years, individual institutions have set the upper limit at 80 years.
What exactly does such a threshold mean? For example, if a 65-year-old customer wants to take out a mortgage at a bank with a 75-year-old age limit, he will have to repay the liability in full just before reaching the age of 75.
Short loan period – lower chances for a mortgage for a pensioner
Due to age, the senior may benefit from a relatively short loan period. It is important because the faster you have to pay back the debt, the higher you pay the monthly installments, and thus – also has lower creditworthiness. The amount of loan installments is one of the most important factors that the bank takes into account when checking the ability to repay a given liability.
If the customer wants to take, for example, a 10-year mortgage of 100,000. with equal installments and an interest rate of 4%, he will repay about $ 1,000 each month. Hardly any Polish pensioner would be able to cope with such a financial burden. Meanwhile, extending the loan period to 20 years, with the same loan amount and the same interest rate, would reduce the monthly installment to just over $ 600. For some seniors with a high pension or income from additional sources, this amount would already be acceptable.
What determines the decision on a mortgage for a pensioner?
Regardless of whether the customer is 35, 50 or 65 years old, the bank considers the loan application in the same way. In each case, the lender’s activities consist in collecting and analyzing information that allows assessing the financial position and payment reliability of the client. Based on the data contained in the application and collected by BIK and registers of debtors, it examines the creditworthiness and history of repayment of liabilities. The senior, like representatives of younger generations, must therefore take into account the fact that the bank will check his: amount and sources of income, level of debt, number of people forming a household, or living costs.
A mortgage application for a pensioner – documents required by the bank
Before applying for a mortgage, you should contact a credit expert. You can also visit a bank branch and ask about the credit process and documentation requirements. Individual banks may apply slightly different rules in this respect, but a certain set of documents is required by each institution.
To be able to verify the senior and assess his creditworthiness, the bank will need documents such as:
- ID card;
- pensioner’s ID or decision on granting the benefit;
- last pension or personal account statement confirming the amount of the retirement benefit;
- documents confirming other sources of income;
- Preliminary agreement for the purchase and sale of real estate.
When a senior applies for a loan to a company with another person, the co-applicant’s personal and income documents will also be required.
It is difficult for a person over 60 to get a mortgage for 200 or even 100,000 dollars. The chances of a positive decision increase when a relatively small amount is missing to finance the purchase of a property – 30,000 or 50,000. dollars. An effective solution may also be joining an economically active co-borrower or providing additional security for the repayment of liabilities.