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Borrowers should not be discriminated by their age but it’s the responsibility of lender to know that they can manage to repayment on time and complete the loan life without undue financial constraints. In this situation, it seemed to be harder to get a mortgage if you are over 40’s.
Obstacles to get mortgages in your 40’s
Occupation is a big factor, because some occupation depends heavily on manual work that will not be possible to carry on in your older age. In the early retirement, your regular income will stop, and you may feel difficulty to prepayment of your mortgages.
Another reason is tied with your income and affordability. Lender has their own system that is why acceptance level of income and affordability may vary. If your income and affordability are not high enough, they will be accused of mis-selling later. Generally, lender takes your annual income and multiplying it by 3,4 or 5 to calculate your borrowing level. But they don’t include full commission or bonus with basic salary that will affect the chance to get your approval or desired type of mortgage.
For example, if your annual basic salary and commission and bonus are 40k and 60k respectively, that make the total 100k for a year. Many lenders take for granted only 50% of your commission or bonus, but some lenders are more generous and accept 80% (very few may go even higher than this). If your lender excludes your half of bonus that affects your borrowing level and you may not get longer than a standard mortgage.
Here are some tips to keep in mind for getting a mortgage in your 40’s.
1. Keep an exit strategy
Lender will ask you about your plan in case of emergency retirement. You have a plan that is clear and bold enough, such as a plan to sell an investment property or other asset as an exit strategy. If your lender convince that you have an asset or any other property for an equivalent to repayable mortgages, they will consider it as a factor for eligibility of mortgages.
2. Clean your debt
Cleaning your current debt plays a crucial factor to get a mortgage because the lender will check whether you can carry on another mortgage or it will be too much to repayment for you. You have to clean your existing debt to increase your chance of approval.
3. Having a large deposit
Your current saving or deposit at a bank is considered as a healthy financial condition. If you have a deposit of $100000 at the bank that will mature soon, lender willingly offer and approve of your chosen mortgage event in your 40’s.
4. Improve and show your credit history
Your lender will check and use your credit rating information to evaluate your current preformation. A good credit rating will help to get a chance of mortgage approval. Check your credit history and correction if needed before applying for a mortgage.
5. Showing your others financial evidence
Listing strong evidence in your application such as document of successful previous paid loan, assessment paper of your other property and sizeable retirement balance etc.