You might be surprised at how mortgage lenders rate older borrowers, whether you’re looking for help financing the Victorian fixer-upper of your dreams, unlocking the value of the house you’ve lived in for years, or taking advantage of rates that are still at almost historic lows.
• Age doesn’t matter. Despite what might seem counterintuitive, lenders see your loan application for a mortgage to be repaid over 30 years the same way whether you are 40 or 90 years old. A plethora of federal civil rights statutes, such as the Fair Housing Act and the Equal Credit Opportunity Act, forbid creditors from treating an adult differently based only on their age.
• Being debt-free may pose a problem. Chief financial analyst at Bankrate Greg McBride notes that if you haven’t recently had debt, one unexpected obstacle may be the fact that you don’t have a credit rating. “It used to be that you looked to retire debt-free. Even though you may have excellent credit history, if you’ve paid off your mortgage and car loan and are no longer in the credit game, there won’t be any recent activity to affect your score. Debit cards don’t count. One of the purposes of using a credit card is to maintain active credit lines in order to demonstrate a current credit history, even if you pay it off in full each month. ” A strong credit score can mean you’ll be approved with a better borrowing rate.
• Retirement income is still income. Mortgage applications usually start with questions about income to document how you will make monthly payments. Retirees can submit a Social Security or pension award letter in lieu of the employed person’s pay stub and W-2. According to Bill Banfield, executive vice president of Capital Markets at Quicken Loans, your income sources have no bearing on how much debt you can carry—unlike your credit score. He states, “We don’t have different guidelines based on profession or employment.” The secondary mortgage market is primarily regulated by Fannie Mae and Freddie Mac, who set the standards. Typically, these agencies mandate that monthly housing and debt payments (which include homeowner’s insurance and real estate taxes) not exceed 50% of monthly income.
• Your savings can work as income. The wealthy are served by specialized mortgage lenders who are frequently connected to stockbrokers such as Merrill Lynch and JP Morgan. They offer different approaches to underwriting some of the same types of mortgages, with terms ranging from 15 to 30 years. If you have investments, ask the firm where they are held about mortgages. For example, the Asset Pro-Forma Method at Morgan Stanley Private Bank allows you to attribute income from investment accounts to your wealth, which can help you get approved for a mortgage even if you don’t have any income. For example, the equivalent annual income of $35,000 for a million-dollar investment account with stocks and bonds (assuming 5 percent of annual income, after a conservative 30 percent discount for market risk) could normally be computed. The investments are only meant to show that the borrower has the financial wherewithal to pay the mortgage; they are not necessary for the borrower to cash in. Another industry term for this kind of loan is “asset depletion mortgage. ”.
In actuality, these presumptions are more cautious than the guidelines set forth by Freddie Mac and Fannie Mae, which are also followed by mortgage lenders nationwide. The same million-dollar investment account—retirement savings in an IRA or 401(k)—may be eligible under the Fannie and Freddie regulations for a “three-year continuance of income.” This calculation shows that the million-dollar account, split over three years, is equal to $233,333 in annual income ($1,000,000 less a 30% market-risk discount, split over three years).
• You don’t need to put down 20 percent. “The myth is still out there,” says Quicken’s Banfield. “But Fannie and Freddie programs allow for mortgages that are 97 percent of a home purchase. FHA mortgages go to 96. 5 percent. The Veterans Administration will do 100 percent. ”.
• Reverse mortgages can be legit. Boomers have, on average, just over $125,000 in home equity, according to Svenja Gudell, chief economist of Zillow. They can be a lifeline for retirees who must use home equity for living expenses. ” A “cash out” mortgage or home equity line of credit can also tap this value. However, unlike a normal 15- or 30-year mortgage, the reverse mortgage loan compounds, with the growing balance due when the borrower moves out or passes away. “Bad actors have given reverse mortgages a bad name,” says Bankrate’s McBride, “but the product is sound. ” Borrowers must be at least 62 years old and are required to go through reverse mortgage counseling. One Reverse Mortgage from Quicken Loans is among the companies that provide Home Equity Conversion Mortgages (HECM) via the Federal Housing Administration. CEO Gregg Smith says, “the home should be a key asset in planning for retirement. ”.
Absolutely! There’s no age limit to getting a mortgage, so at 53, you’re perfectly eligible to apply for a 30-year loan. However, there are a few things to consider before you jump in.
Factors that influence your eligibility:
- Income: Lenders will want to see that you have a steady income to make your monthly mortgage payments. This can include your salary, pension, Social Security, or other reliable sources.
- Credit score: A good credit score shows lenders that you’re responsible with your finances and have a history of paying your bills on time. This will help you qualify for a lower interest rate.
- Down payment: The amount of money you put down upfront will affect your loan amount and monthly payments. A larger down payment means a smaller loan and lower monthly payments.
- Debt-to-income ratio (DTI): This is the percentage of your gross income that goes towards debt payments, including your mortgage, credit cards, and other loans. Lenders typically prefer a DTI of 43% or lower.
- Property value: The value of the property you’re buying will also play a role in your eligibility. Lenders will want to make sure the loan amount is not more than the property’s value.
Benefits of a 30-year mortgage:
- Lower monthly payments: Compared to a 15-year mortgage, a 30-year loan will have lower monthly payments, making it more affordable for many borrowers.
- More flexibility: With a longer repayment period, you have more flexibility in your budget and can potentially free up funds for other expenses.
- Lower interest rates: Currently, interest rates are at historic lows, making a 30-year mortgage a very attractive option.
Things to consider:
- Total interest paid: Over the life of a 30-year mortgage, you will pay more in interest than you would with a 15-year loan.
- Opportunity cost: By choosing a 30-year mortgage, you are essentially paying for your home over a longer period, which means you could be missing out on other investment opportunities.
- Future financial situation: It’s important to consider your future financial situation and whether you will be able to afford the monthly payments for the next 30 years.
Here are some additional resources that you may find helpful:
- This Old House: Are You Ever Too Old to Get a Mortgage?
- PBS NewsHour: Does It Make Sense to Get a 30-Year Mortgage at Age 66?
The choice to take out a 30-year mortgage at 53 is ultimately a personal one. Examine the benefits and drawbacks carefully, and consult a mortgage lender for specific guidance.
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If you’re buying or refinancing, the answer may surprise you
You might be surprised at how mortgage lenders rate older borrowers, whether you’re looking for help financing the Victorian fixer-upper of your dreams, unlocking the value of the house you’ve lived in for years, or taking advantage of rates that are still at almost historic lows.
• Age doesn’t matter. Despite what might seem counterintuitive, lenders see your loan application for a mortgage to be repaid over 30 years the same way whether you are 40 or 90 years old. A plethora of federal civil rights statutes, such as the Fair Housing Act and the Equal Credit Opportunity Act, forbid creditors from treating an adult differently based only on their age.
• Being debt-free may pose a problem. Greg McBride, chief financial analyst at Bankrate, says an unexpected stumbling block can be that you don’t have a credit rating if you haven’t recently been in debt. “It used to be that you looked to retire debt-free. You may have a great credit history, but if you’re out of the credit game now—debit cards don’t count, and you’ve paid off your car loan, you’ve paid off your mortgage—there’s no recent activity to give you a score. It’s one of the reasons to use a credit card even if you pay it off completely each month, just so you have active credit lines to show a current credit history.” A strong credit score can mean you’ll be approved with a better borrowing rate.
• Retirement income is still income. Mortgage applications usually start with questions about income to document how you will make monthly payments. Retirees can submit a Social Security or pension award letter in lieu of the employed person’s pay stub and W-2. According to Bill Banfield, executive vice president of Capital Markets at Quicken Loans, your income sources have no bearing on how much debt you can carry—unlike your credit score. He states, “We don’t have different guidelines based on profession or employment.” The secondary mortgage market is primarily regulated by Fannie Mae and Freddie Mac, who set the standards. Typically, these agencies mandate that monthly housing and debt payments (which include homeowner’s insurance and real estate taxes) not exceed 50% of monthly income.
• Your savings can work as income. The wealthy are served by specialized mortgage lenders who are frequently connected to stockbrokers such as Merrill Lynch and JP Morgan. They offer different approaches to underwriting some of the same types of mortgages, with terms ranging from 15 to 30 years. If you have investments, ask the firm where they are held about mortgages. For example, the Asset Pro-Forma Method at Morgan Stanley Private Bank allows you to attribute income from investment accounts to your wealth, which can help you get approved for a mortgage even if you don’t have any income. For example, the equivalent annual income of $35,000 for a million-dollar investment account with stocks and bonds (assuming 5 percent of annual income, after a conservative 30 percent discount for market risk) could normally be computed. The investments are only meant to show that the borrower has the financial wherewithal to pay the mortgage; they are not necessary for the borrower to cash in. Another industry term for this kind of loan is “asset depletion mortgage. ”.
In actuality, these presumptions are more cautious than the guidelines set forth by Freddie Mac and Fannie Mae, which are also followed by mortgage lenders nationwide. The same million-dollar investment account—retirement savings in an IRA or 401(k)—may be eligible under the Fannie and Freddie regulations for a “three-year continuance of income.” This calculation shows that the million-dollar account, split over three years, is equal to $233,333 in annual income ($1,000,000 less a 30% market-risk discount, split over three years).
• You don’t need to put down 20 percent. “The myth is still out there,” says Quicken’s Banfield. “But Fannie and Freddie programs allow for mortgages that are 97 percent of a home purchase. FHA mortgages go to 96. 5 percent. The Veterans Administration will do 100 percent. ”.
• Reverse mortgages can be legit. Boomers have, on average, just over $125,000 in home equity, according to Svenja Gudell, chief economist of Zillow. They can be a lifeline for retirees who must use home equity for living expenses. ” A “cash out” mortgage or home equity line of credit can also tap this value. However, unlike a normal 15- or 30-year mortgage, the reverse mortgage loan compounds, with the growing balance due when the borrower moves out or passes away. “Bad actors have given reverse mortgages a bad name,” says Bankrate’s McBride, “but the product is sound. ” Borrowers must be at least 62 years old and are required to go through reverse mortgage counseling. One Reverse Mortgage from Quicken Loans is among the companies that provide Home Equity Conversion Mortgages (HECM) via the Federal Housing Administration. CEO Gregg Smith says, “the home should be a key asset in planning for retirement. ”.
Should I get a 30-year mortgage? | About That
FAQ
Can a 53 year old get a 30-year mortgage?
At what age do banks stop giving 30-year mortgages?
Is 50 too old for a 30-year mortgage?
Should you take out a 30-year mortgage at age 50?
Should I get a 30-year mortgage?
You might prefer a 30-year mortgage. That way, you have enough money to also save for your kids’ college tuition. Last, with a 30-year loan, you can put extra money into your mortgage payments when you can. In doing so, you might knock out that home loan in 20 or 25 years. But you’ll have the option of a lower payment if you need it.
Are older adults eligible for a 30-year mortgage?
The best advice is for homeowners to investigate all of their financing options, consider their personal finances and make an informed decision. Older adults often assume that they are not eligible for a 30-year mortgage. Legally, however, banks can only offer loans based on financial qualifications alone.
Can I still get a 30-year mortgage if I’m 25 or 70?
And if you’re looking to buy a house, you might wonder if you can still land a 30-year mortgage when your age is north of 60. The short answer: absolutely! Luckily, whether you’re 25 or 70, lenders look only at certain numbers when reviewing a mortgage application.
Can you get a 30-year mortgage if you’re retired?
When you’re retired, though, landing a 30-year mortgage can be more complicated. So here’s what older borrowers should know about income qualifications before applying for a mortgage. Older borrowers are protected by something called the Equal Credit Opportunity Act, which means mortgage lenders can’t deny their applications based on age.