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Too old to borrow

Discussion in 'Property Finance' started by Vacant, 21st Mar, 2016.

  1. Vacant

    Vacant Well-Known Member

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    A friend of mine recently talked to his bank (Greater Building Society) about borrowing to buy a house and was told he was too old to borrow so instead he went and bought a brand new car.

    I fear he has really shot himself in the foot by buying a $50k car with cash. He's around 57, self employed and gets a pretty good income from his business and his expenses are pretty low given his kids are adults and it's just he and his wife. Looks like a pretty good person to lend to to me. He wouldn't be looking to spend over 500k and I imagine he would have had at least a 20% deposit.

    How old is too old? My Dad has just turned 60 and is looking to expand his portfolio in the next few years by developing, are there any strategies for 60+ looking to borrow?

    The amount of people I know that just talk to their bank and decide they can't do it astounds me. Good brokers are well worth talking to.
     
  2. kierank

    kierank Well-Known Member

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    My wife is 60 and I am 60 in June. We are both retired and are self funded. We have just been approved for our biggest loan ever (twice the size of my previous largest loan) for buy a property. We had 3 banks fighting for the business.

    So 60 is not too old. I think as long as you have good security (prior to this loan, our LVR was around 12% from memory) and good income (in our case, rents and our pension), you can borrow money.

    The new loan term is 5 years. May be harder for us when we get to 65 - we will see.
     
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  3. tobe

    tobe Well-Known Member

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    Lots of lenders have different interpretations of how old is too old. He should have got a second opinion.
     
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  4. Cactus

    Cactus Well-Known Member

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    57 isn't too old to borrow. My dad is older and has no problem assessing borrowing. Problem is he also uses it to buy cars.
     
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  5. Joshwaaaa

    Joshwaaaa Well-Known Member

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    My old boy is 58 and self employed, he just got finished with building a $600k holiday/retirement home. He does have a paid off family home and factory for his business though which probably helps.
     
  6. Simon Moore

    Simon Moore Mortgage Broker - Melbourne Business Member

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    You can borrow at any age, but you have to have a reasonable strategy to extinguish that debt.
    Borrowing for a PPOR at 57 is always going to be hard, but if he had a bunch in super or other assets and would take a shorter loan term, say 15 years, it's doable.

    I recently did a loan for a 69 year old, he is expanding his business! He had a great net asset position so if something did happen he would have no problem repaying the loan, and had a succession plan in place at his business.

    In summary borrowing after 55, investment easy (generally), PPOR hard. If you want a PPOR loan think about shorter loan terms to give the bank a safety net, and have some method to pay off the debt if you are unable to continue working ie cash sitting in super.
     
  7. Jason Tyrrell

    Jason Tyrrell Well-Known Member

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    All comes down to exit strategy. Perhaps as a self-employed person his business took a while to build and he doesn't have much Super.
    May have been worth looking at an investment property to build equity, and maybe move into around retirement age. Would be an easier lend.
    As mentioned above, different lenders have different interpretations of how able a person would be to ultimately wipe the debt.
     
  8. Biz

    Biz Well-Known Member

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  9. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    I think the oldest person I've gotten a loan for was 73.

    You've got to choose the lender carefully and you've got to address the various exit strategies from the debt when they retire.
     
  10. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

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    Aged policy is extremely varied between lenders - Lender A might require a 60 yr old to have an IP loan at P&I 15 yr term, whilst another will provide a 30 year, 5 years IO term.

    Exit strategy is the most important factor with lenders - they want to know how the client intends to cover their debt position and the long term goals. Selling up and renting isn't seen as a favourable outcome in most lenders eyes.
     
  11. Jason Tyrrell

    Jason Tyrrell Well-Known Member

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    Macquarie used to be a "go to lender" for age related deals.
    They were very flexible in this area. But have come back to the field in recent times.
     
  12. Marty McDonald

    Marty McDonald Mortgage broker Business Member

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    I'm doing a $995K cash out loan against a PPR for two 77 year olds for future investment. Loan is formally approved. Does it make sense - Yes..How will the loan be repaid - from other assets including property, shares and super. All common sense really.

    That said some lenders are just dicks about anything slightly outside plain vanilla at the moment. Sick of it!
     
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  13. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    Westpac have no age policy on investment properties - das ist nutzlich
     
  14. Vacant

    Vacant Well-Known Member

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    Thanks guys, fairly interesting info. Looks like Dad should be sweet, doubt he'd be at 30% LVR. Feel sorry for my friend, only found out about it yesterday. Hope he enjoys his new car.

    If you own a company that will continue to operate once you decide to take a hands off approach (i.e. still a director but not doing the grunt work) will the lenders take that income into consideration as you get older? I can understand not wanting to lend to a 65 year old that's about to retire and live off a pension but if the 65 year old is still making good money from their business would the banks consider them as less risky or still likely to take a harder stance in case they keel over and die?
     
  15. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    @Vacant the problem with anyone approaching retirement, regardless of their circumstances is exactly how long will they continue to work for? Certainly a lot of people work to 70 these days, but what about beyond that?

    If they own a business and they're mostly hands off, that opens up quite a few great options. Lenders will give allowances that they may have the income longer than most others would. They'll also look at how much the business might be worth, and how that can be worked into an exit strategy (the 73 year old I mentioned perviously was going to sell the business and pay off the debt, which is what he did).

    Lending to older people is quite restrictive, the trick is to show the bank how they'll fund their own retirement, or at a minimum, how they'll pay off the loan when the can no longer work.
     
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  16. kierank

    kierank Well-Known Member

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    Our banks had some initial concerns about us meeting the interest payments. Then I told them we could give ourselves a 25% pay rise at anytime.

    That is, increase our pension from 4% to 5%. That did the trick. Had to get our Financial Planner to confirm that our SMSF wouldn't run out of money though :) :).
     
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  17. Big Will

    Big Will Well-Known Member

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    Would of loved to have seen the banks faces when you told them that!

    Not everyone can just give themselves a 25% pay rise with a few clicks of the mouse, must be a very nice position you are in.... Well done.
     
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  18. Darlinghurst Boy

    Darlinghurst Boy Well-Known Member

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    Omg !! 77yo and they want to take the risk of investing ?
    Everyday they wake up at that age is a blessing !
    What is their goal... I mean their lifespan would be about another 6 to 8 years.
     
  19. Marty McDonald

    Marty McDonald Mortgage broker Business Member

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    Their goal is to live forever. Seriously though the husband still runs a reasonable sized company. I think they just enjoy investing