Applying for a home loan at any time of life can be stressful, if you are young you wonder if you need to rush into it and if you need the debt. When applying for a home loan in your 40’s you worry more about the length of the loan as no one wants to work through retirement. We have put together a few tips and advice on the main concerns you should have when applying for a home loan after 40.
Credit Rating
If you have decided to purchase a house, the first thing that you need to do is make sure your credit rating is as high as it can be. You can access your credit score and determine if there are things you can do to improve it. This is maybe paying off any credit cards or overdrafts you have or even taking out a small loan and repaying it fully on time to get you on the system. Taking a small loan to improve your credit ranking is only for people who have not had much credit. If you are just at the beginning of planning for a home you should ensure you are giving yourself the best chance of a successful application by putting every effort into improving your credit. Massive improvements to your credit can happen in a short space of time so don’t put it off.
Larger Deposit
Perhaps the most obvious way to ensure you get the best loan in your 40’s is to save up for a large deposit. If you can pay off 30% as a deposit, this reduces the borrowing from the bank which in turn reduces your payments. If paying so much is not possible look for ways to pay even a small amount above the standard 20% deposit. The problem here is the longer you save for a deposit, the older you get, and you still have to pay rent in your current home, so this may seem like a good idea, but in practice, you don’t benefit. There is, of course, the option of borrowing from family for some, this can help but again if you borrow you still need to repay the loan. Everyone who works but has no mortgage should be saving something towards a deposit in the future.
Length of Loan
Being nearer retirement age many lenders may not want to offer more than 20-year terms which will make each monthly repayment more substantial. Again a larger deposit may negate that buy and you may need to shop around. There are many online tools and providers to use; some have online calculators to help you plan or tools to help keep track of a loan. As populations are ageing many lenders do realise that first time buyers are getting older and they have mortgages in place with shorter durations, these sometimes need more substantial payments for the first few years to reduce the overall capital borrowed and then as you reach retirement age the repayments drop down again. Also be wary not to overburden yourself with large repayments as this can lead to foreclosure.
Joint Application
Taking on a loan with a spouse or partner gives you the most excellent chance of being approved for a home loan in your 40’s. The banks will take in to account both you and your partner’s salary. For those planning to buy with a friend, be careful as you don’t know what the future will bring. The chances are you will also have more money saved with two contributing to the fund. Joint applications also reduce the liability on the bank as if one of you is ill and can’t work the other may be able to pick up the slack. If you are in a fortunate position to be applying for a joint loan and you have a parent to help guarantee the loan you will be in good shape to get approved.
Choose the Right Lender
The most critical factor in getting a home loan in your 40’s or at any age, is choosing the right company for you. You need to make sure of the bank’s reputation, the repayment options available, no hidden fees or charges, ease of use whether online or in person. There are a plethora of providers out there who all want your business so make sure you take the time to investigate them as much as they investigate you before agreeing to a loan term with them. Never feel obligated to continue with a provider if you are not 100% satisfied it is the correct loan option for you.
There are services online you can utilise to evaluate lenders offers and compare banks you have an interest in. A comparison website will give you a clear idea on the best loan providers for you.
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