The bank is most afraid that the pensioner will not be able to settle the loan, and that his health will deteriorate over time and make it difficult for him to pay the installments. However, there are some solutions by which a senior can increase his chances of getting a mortgage.
Choosing a bank with a high age limit for the borrower
This is the most obvious and the easiest way to increase your chances of getting a positive credit decision. When submitting an application at a bank where the age limit reaches, for example, 80 years, and not the standard 70 or 75 years, the senior can count on a longer loan period and thus greater creditworthiness. However, he should remember that where there are less restrictive rules, life insurance with a bank assignment is usually necessary.
Making a high own contribution
Pursuant to the provisions, when applying for a mortgage, you must make an own contribution of at least 10% of the value of the property you are purchasing. A senior who has set aside a larger amount and earmarks it for his own contribution will increase the chances of a positive credit response. The higher the amount, the more likely the bank will grant him a loan. It is worth noting that an additional contribution may be not only cash, but also the establishment of a mortgage on another property (e.g. on a recreational plot), or a set on securities (e.g. treasury bonds).
Importantly, even if a pensioner is able to make 80% or 90% of his own contribution, he still has to prove that he can meet the loan repayment. Banks assume that the monthly cost of maintaining a household is about 1000-1200 dollars, therefore the amount of pension received by the senior must be correspondingly higher (i.e. one that is sufficient for monthly expenses and repayment of loan installments).
Having an additional source of income
When examining creditworthiness, the bank takes into account all stable, documented sources of customer income. If a senior gets a retirement benefit and is still working, or earns income from renting an apartment, his chances of getting a loan increase.
Joining the co-applicant
The senior situation may also be improved by submitting the application together with the child, grandson or other professionally active co-applicant. The bank will sum up the income of all persons attached to the application and on this basis calculate their creditworthiness. Importantly, however, in this case, it will also thoroughly review the situation and financial credibility of the potential co-borrower. If the latter has considerable debt, in the past he has not repaid his loans reliably, or has several dependents, then joining the loan will only worsen the assessment of the application.
It is worth remembering that a pensioner who has a spouse and is associated with him in a community of property, always takes a loan with him. If your spouse is unemployed, this will mean a lot of trouble getting a loan.
Take out life insurance
In the case of a mortgage for a pensioner, this point is basically a must. The life insurance policy gives the bank the certainty that if the borrower dies before settling the entire liability, the remaining part of the debt will be paid by the insurer. Importantly, it is required to make an assignment from insurance to the lender, in an amount not lower than the sum of the loan.
Obviously, the client's age is also reflected in the parameters of the life insurance policy. The high risk of his death translates into a high premium as well as a small selection of insurance offers.