For those who thought being 40 was still all about swimming in the fountain of youth, then it might be time to rethink that idea – especially if you’re in the market for your first home.
In today’s society, being on the ‘wrong’ side of 40 is a perfectly normal life stage to have a baby, get married, or be Leonardo DiCaprio, however it’s an age bracket that makes mortgage lenders take a second look.
Before the outraged cries of ageism begin, there’s actually a legitimate reason why financial power houses look at age when it comes to first homebuyers. It comes down to retirement.
Put bluntly, if you’re househunting after 40 (and most home loans these days are for 30 years) then you’ll be around 70 when that last payment is made. And chances are your wage earning days will be behind you.
Despite this hurdle, the first-home buying public continues to age. Whereas a generation ago Australians were making their final mortgage repayments by their 40th birthdays, by 2012 one in five first-time buyers were more than 40 according to a Mortgage Choice survey.
THERE ARE SUCCESS STORIES
Cindy Lavelle, 53, and Bern Smith, 50, are first homebuyers from Brisbane who recently took the plunge into homeownership after raising two children who are now in their 20s.
‘We thought about it over the years, we kept saying to each other we should buy a house but time just goes by so quickly. They next thing you know – you’re 50!’ Ms Lavelle said.
She said the pair can’t help but feel an inkling of regret that they didn’t get on the property ladder sooner.
‘Definitely, there is a little bit of that. If we’d bought years ago, maybe we would have paid it off by now,’ she said.
‘My advice to anyone putting it off is to not wait. Just do it. If you have to cut back on little luxuries then do it and once you get used to putting a certain amount aside each week then you’ll make a difference,’ she said.
While embarking on the first homebuyer journey later in life has been fairly hurdle-free, Ms Lavelle said the pair, who work in the childcare industry and warehousing, did have to jump through a few hoops and answer plenty of questions.
‘The broker wanted to know a lot about our super. How much we have, or will have later by the time we retire. Those are things you just don’t think about when you’re younger,’ she said.
Reversing the natural order of things, Lavelle and Smith’s son jumped into homeownership at a particularly young age.
‘My 28-year-old son and his wife actually bought their first place when they were both 21! They lived with us for a while, so I guess you could say we helped them before ourselves,’ Ms Lavelle said.
Lavelle and Smith recently bought a block of land and will soon break ground building their dream home in suburban Brisbane. And because the couple are getting into a newly built property they are actually eligible for a helping hand.
‘Yes, we’re actually going to get the first home grant!’
WHAT HAPPENS WHEN YOU BORROW OVER 40?
Tim Brown, CEO of lending at mortgage broker and financial planning firm Yellow Brick Road, said being over 40 can make lenders more curious, but doesn’t have to be a problem.
‘There’s no doubt the older you are the more questions get asked. The obvious one is why haven’t you bought a house before now?’ he said.
‘And some of that can be because of circumstances; maybe they’ve been overseas for the last 20 years, they’ve gone through a divorce, which is probably the most common, and they’ve got no money left or then there’s the third scenario – maybe it just wasn’t a priority in their life,’ he said.
Mr Brown said lenders will most likely be more wary of borrowers who fall into the third scenario.
‘As long as a lender can understand where you’ve been spending your money then they’ll tend to be much kinder. So, if you could actually show that you’ve been looking after your mother for the last 10 years, or you were living overseas and there was no need for you to own a home at that point, but you do have strong super, then that could help your case. As long as you can document that you have some ability to make repayments,’ he said.
Even lifelong renters can make a case.
‘What we look at with first home buyers is their ability to pay rent on time so as long as you’ve got clean rental record that would also help. Especially if you rent is equal to or more than potential your mortgage repayments. That will also get a lender might to look more kindly at you,’ he sad.
Finally, Mr Brown said the length of the loan could also be renegotiated depending on age.
‘They might make a decision that if you want this loan, they’ll give it to you but it has to be paid out over, say, 15 years and then they give you what the new repayments are,’ he said.
‘But I think anyone who was heading towards retirement would want to pay the debt down sooner anyway. Nobody wants to be in retirement and still paying a debt off. Although that can be a real situation these days,’ he said.