The mortgage market has its senior share. Approaching retirement or being a pensioner does not prevent cases from taking out a loan linked to the home. From helping your children to buying a second home, experts call for assessing its suitability, costs and alternatives.
“They don’t usually ask for many, older people tend to be very sensible with debt,” says Ricardo Gulias, CEO of RN Your Mortgage Solution. They are not launched without necessity: they are few, but they exist. There is a recent case of a 69-year-old client, recently divorced, who, seeing that they were not going to rent a home, requested a mortgage to purchase. More common is the assumption of older people who mortgage their home to help purchase their children’s house when they have no savings. “This has been done a lot,” he points out. The house is put as a guarantee and what you get can be donated to your children.
In any case, the entity always has the last word. It does a study of the regular client and applies a limit of years: the formula used is to add the age of the client and the years of the mortgage. Together they cannot exceed 75 years, although some entities stretch to 80. Thus, if someone who is 65 years old requested a mortgage, at most they would give it to them for 10 or 15 years. A shorter term implies higher fees. Logically, the fewer years, the more possibility of concession.
Although the conditions may be the same as in other ages, “things do change in linked products,” warns Rafa Moral, analyst at the Hipoo mortgage service. Mainly, the contracting of life insurance may be required to improve the mortgage. “You have to assess whether you can pay (the premium is usually high at these ages). And whether it should be contracted directly or not: it may not be worth it, perhaps it is more profitable to contract the loan without the link and assume an increase in the rate, opting for life insurance on the market, which is usually cheaper,” he explains.
Mortgaging for a second residence is another practice. The advice here is not to do it if you have not already covered the mortgage on your primary home. “If it has been paid for decades it can be a point in its favor,” says José Manuel Fernández, deputy general director of the Real Estate Credit Union (UCI). “Financing for second homes usually reaches 70%, so you will have to contribute 30% plus 10% for expenses.” More entry capital…
Another reason is housing renovation. “With aging there are abrupt jumps in health. The best thing is to act preventively, by changing the bathtub for a shower tray, putting handrails in the hallways, night lights…”, explains Benigno Lacort, senior economics expert and professor at the European University. That has to be paid for. If the expense is high, “it is better to request a mortgage for terms and types. It is 66% cheaper than a consumer loan,” Gulias compares. Today it can go from 9% to 3.3%, he details.
Reaching retirement and still having payments to pay is a more common situation. Is it advisable to pay off the mortgage as soon as possible? With stable income, “you don’t have to stress about the interest you can save. If you go into debt with 65 or more, it may be advisable to get rid of the debt as soon as possible,” says Gulias. In addition, the penalties that the mortgage may have for canceling early are presented. The maximum is that the debt is contained, that it does not exceed 35% of the family unit’s pension, like a retired couple.
Apart from the traditional, if liquidity is needed at advanced ages, the market offers other solutions. In recent years, reverse mortgages and bare ownership have grown, offering liquidity with equity, although they are also residual. “They are little known because people distrust them. They have developed less than in other countries, but they have tax advantages,” Lacort counters. What must be considered is that the payment, which is usually monthly, does not exceed 60% of the appraised value of the home and that the debt ends up falling on the heirs. Lacort sees them as more appropriate than the common mortgage.
