Is there an ideal age to borrow? Not too young, not too old? If the question is common, the answer is not obvious and may vary depending on the bank, but also, and more generally, depending on the profile of the borrower. Borrowing 25-30 years or retired is obviously not in the same conditions.
Is there an age limit for borrowing?
Being retired and wanting to make a mortgage are not two incompatible things, far from it. If there is one point to emphasize, this is it: there is no age limit from a legal point of view. It is therefore possible, in theory, to subscribe a credit at any age. In practice, the situation is nevertheless more complex. The borrowing conditions are not the same depending on whether you are a thirty-year-old entering the workforce, a working-age forty or a retired sixty-year-old. For each borrower profile there are age-related difficulties. Difficulties that sometimes can lead to the refusal of mortgage.
After 60 years in particular, the situation is complicated and because of the difficulty of obtaining mortgage insurance. Who says real estate credit, says insurance borrower. If this insurance is not mandatory, almost all banks require it. The purpose is for the latter to guarantee the payment of loan maturities in the event that the borrower is unable to repay it. If health problems can happen at any age, the risks increase as you get older. However, the more risks, the more this insurance becomes expensive and difficult to get. Banks therefore prefer younger profiles, security pledges.
Nevertheless, with the increase in life expectancy, banks are forced to change their approach. They thus lend themselves more easily to pensioners, even if the conditions prove more stringent. Be that as it may, the bank looks first and foremost at the current and future incomes of the borrower to determine the risk taken. The higher the risk, the higher the bank will offer a high interest rate. It can also, and simply, refuse to grant the mortgage. Indeed, nothing obliges a bank to grant a mortgage.
Take out a mortgage when you’re young
According to a survey of a brokerage professional devoted to the “typical borrower profile”, the average age was 36 years old last year. A profile appreciated by banks because they are customers with many years of work before them and therefore many wages to collect. For young people, the difficulty encountered is not related to age. For the latter the problem concerns the contribution. While banks demand a contribution, the youngest borrowers can not always meet them. If they manage to constitute one, it can also be of insufficient amount.
Another problem that can arise for young people is having a permanent contract and fixed and sustainable incomes. It is now very difficult, if not impossible, to borrow without having a CDI and income guarantees. If these two conditions are met, the young profiles, often first-time buyers, are offered solutions adapted to their situation. Banks offer them long-term loans. According to the CSA Housing Credit Observatory, the average loan term in 2018 was over 19 years.
Real Estate: Borrow after age 60
Borrowing up to 65 years does not pose any particular difficulty; the calculation of premiums does not change, whether the borrower is 40 or 65 years old. Once this fateful age has passed , it is the death-disability insurance (this is the main guarantee offered by a loan insurance) related to credit that is problematic. According to the contracts but especially according to the establishments, the age limit varies between 58 and 70 years. At a higher cost than “traditional” contracts, a large number of banks and insurers nevertheless offer “senior” contracts adapted to the elderly. For these insurances, coverage can go up to 85 or 90 years. It should not be forgotten either that for seniors, as for people who have or have had a serious health problem, there is the AERAS convention (insurance and borrowing with an aggravated health risk). The latter facilitates their access to insurance and loans.
However, credit insurance is not the only difficulty older borrowers face. When they take out a mortgage after 40 or 50 years, their repayment is not completed when the time comes for retirement. A cap synonymous with declining revenues. To cope with this, some banks are developing à la carte financing . This allows for lower monthly payments and insurance premiums when you retire. These profiles nevertheless benefit from their age. While younger workers often struggle to make a contribution, older workers sometimes have significant savings. The borrowing rate will be very similar to that of a borrower of 35 or 40 years.