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There\u2019s no question that anyone at any age is allowed <\/em>to get a mortgage loan. The Equal Credit Opportunity Act<\/a> is clear on that point: \u201cindividuals cannot be discriminated upon via factors that are not directly related to their creditworthiness,\u201d including their age.<\/p>\n However, as we all learned from Jurassic Park\u2019s Dr. Ian Malcolm, \u201cYou were so preoccupied with whether you could<\/em>, you never stopped to think if you should<\/em>.\u201d And, that\u2019s where disaster began.<\/p>\n While financial planners and experts will often recommend buying a house<\/a> rather than renting, it\u2019s interesting to note that their recommendations change as the buyer gets older. At the same time, there are good reasons why seniors should consider applying for a mortgage later in life. So, let\u2019s consider both the pros and the cons of getting a mortgage as a senior citizen.<\/p>\n To begin with, it\u2019s important to note that, although no bank can deny a mortgage loan based on age, everyone needs to meet the same financial qualifications in order to be approved. Generally, these include a high enough<\/a> credit score<\/a>, appropriate debt-to-income ratio, and proof of adequate income.<\/p>\n Related: How t<\/a>o <\/a>Fix Your Credit<\/a> to <\/a>Buy a Home<\/a><\/strong><\/p>\n For seniors who are no longer working, or who are living primarily on a fixed income, this can be tougher than it is for younger buyers who enjoy greater future earning potential.<\/p>\n The banks are not only looking at a buyer\u2019s current economic situation<\/a>, but also what they reasonable expect will happen down the road: If their financial history shows a steady increase in wages during a long tenure at their current job, it\u2019s reasonable to expect that trend to continue. However, if the financial history shows several years of identical social security payments and little else, it\u2019s reasonable to expect that to continue as well.<\/p>\n The trouble is, the economy doesn\u2019t stay still. Inflation, energy costs, and many other cost-of-living factors are constantly changing, often becoming more expensive over time. As a result, it\u2019s quite possible a long-term loan like a mortgage could make sense on paper today, but be completely unaffordable five or ten years in the future.<\/p>\n As a result, seniors on fixed incomes are generally less likely to qualify for standard mortgage financing from most lenders. This isn\u2019t because of their age, but rather because of their current and future financial situation.<\/p>\n Of course, many seniors have more favorable financial circumstances including investments, savings, and pensions with cost-of-living increases built in. In those cases, lenders are unlikely to think twice about approving a mortgage.<\/p>\n There are other things seniors should consider<\/a>, though, even if they\u2019re approved for a mortgage based on their financial situation:<\/p>\n Cash flow is a problem for seniors on a fixed income, or whose wealth is wrapped up in non-liquid investments. While they\u2019re able to qualify for a mortgage based on the big picture, if they\u2019re not actually bringing in enough cash each month to cover the mortgage payment along with all the other necessary living expenses, they\u2019re going to run into trouble.<\/p>\n Adding to this challenge is the fact that many necessary expenses change regularly and unexpected situations such as medical emergencies or car repairs can quickly put a strain on an otherwise healthy budget<\/a>.<\/p>\n Costs that are inherent to homeownership tend to rise over time, sometimes unexpectedly. Beyond the basic mortgage payment, which should stay the same (unless it\u2019s a variable-rate loan), owning a home requires the payment of utility bills, property taxes, repairs and maintenance, and insurance, at the very least. All of these costs can (and probably will) rise over time.<\/p>\n Since most seniors have a cap on their earning potential \u2014 even if they\u2019re in a good financial position at the start of the mortgage \u2014 these costs could eventually make the home unaffordable before it\u2019s paid off.<\/p>\n It\u2019s not pleasant to think about, but it\u2019s important for seniors considering such a large financial commitment to recognize that there\u2019s a very good chance they\u2019re not going to outlive the term of the loan. This is important for a few reasons:<\/p>\n For married couples, income is often based on both spouses being alive. Should one pass away, it could result in the household income dropping by a significant amount, while the mortgage payment remains the same. Likewise, even if the spouse is not affected, a relatively new mortgage in which little equity has been built up can become a burden for children or grandchildren.<\/p>\n All that being said, there are some situations where a new mortgage may be the best option for someone over 65.<\/p>\n One example is obtaining a refinanced mortgage on a current residence, which results in lower monthly payments and\/or a shorter term. As long as the initial fees and down payment required are affordable at the time of the application, this can be a wise way to make retirement more manageable and speed up debt reduction for estate planning purposes.<\/p>\n To conclude, there are no hard-and-fast rules regarding whether a senior citizen should apply for a mortgage. As with any potential homebuyer, seniors do well to seriously consider whether they can reasonably afford the cost, and if they\u2019re willing to make the commitment. With the help of a trusted financial planner, and a solid grasp of the pros and cons involved, they can come to the best decision for their situation.<\/p>\n If you’re looking into a mortgage, but are concerned about your credit, learn more about our credit repair services.<\/a><\/p>\n You can also carry on the conversation on our social media platforms. Like and follow us on Facebook<\/a> and leave us a tweet on Twitter<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":" There\u2019s no question that anyone at any age is allowed to get a mortgage loan. The Equal Credit Opportunity Act is clear on that point: \u201cindividuals cannot be discriminated upon via factors that are not directly related to their creditworthiness,\u201d including their age. However, as we all learned from Jurassic Park\u2019s Dr. Ian Malcolm, \u201cYou […]<\/p>\n","protected":false},"author":35,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[17],"tags":[78],"yoast_head":"\nWill you qualify?<\/strong><\/h2>\n
Why seniors should probably avoid getting a mortgage<\/strong><\/h2>\n
Cash flow<\/strong><\/h3>\n
Rising expenses<\/strong><\/h3>\n
Estate concerns<\/strong><\/h3>\n
Why seniors should consider getting a mortgage<\/strong><\/h2>\n
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