Chapter 1: What is the main topic discussed in this episode?
The Clare Byrne Show on Newstalk. With Aviva Insurance.
Now, as house prices continue to rise, and a lot of us are getting on the property ladder a little bit later in life, how much does our age factor into our chances of buying a home? And how difficult is it to get a mortgage if you are over the age of 40? Well, here to tell me more is Director of Financial Planning at Finero Financial Advisors, Carina Dwan. Carina, you're very welcome.
Thank you, Clare. Thank you for coming in. So are you seeing this more now that people are, I mean, clearly with the housing situation, people are having to wait a little bit longer.
Chapter 2: How does age affect my chances of getting a mortgage?
But are some people now only looking at getting a mortgage in their late 30s, early 40s?
Yeah, I think people at this stage now are looking at getting on the ladder. If we go back to 2006, 2007, a lot of people were kind of, we'll say, locked out of getting on the property ladder at that stage. And they're now all coming into kind of their early 40s, mid 40s. So it is becoming a real issue because I suppose with the housing shortage as well, it's more and more difficult.
And obviously the prices are going up and up. So it is, we have a lot of people that we will be talking to that are you know, either trying to trade up or trying to get on the ladder for the first time.
And people always felt that pressure of, in my 30s, I have to get on the ladder. And there was reasons why we felt that pressure because it felt like the clock was ticking in that decade of your life.
Yeah, 100%.
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Chapter 3: What challenges do people face when getting a mortgage over 40?
And I think, again, going back to like we hear a lot of people talk today about the pressures of trying to get a home. But I think that's always been with us. I think every generation has had their own reasons for not being able to get that property. But now we just have much more of a shortage. But people want that security. They want a place to call their own.
We have a pension crisis in the country at the moment as well. So people are looking at going into their retirement now, renting probably for the first time in, you know, probably the first time ever, really.
But one of the reasons why people really thought, if I don't get this done in my 30s, I'm not, it's not going to happen for me, was because of the rules around mortgages. So you might explain some of that, why that pressure is there, because a lot of it is coming from the lenders and their rules, right?
Yes. Yeah. So traditionally, the maximum age that you could take a mortgage out on was 65. So up when you would get to that traditional retirement age. Some of the lenders have pushed that out to 70. And now we've new entrants that have come into the market as well. And they're going up as far as 80 years of age.
That you'd be paying back your mortgage at like 79.
It's not ideal. It does give people, I suppose, options. And I think anything that gives people options is a real win. But there are things to remember. Like if you are in your early 40s and you're looking at going to 80, you know, that is a long time and you really need to know how am I going to continue to pay that beyond retirement.
But it's not all doom and gloom either if you're in your 40s, because people in their 40s have probably had longer term to save their money. Some people may have had redundancy payments, you know, that they can put a bigger deposit.
So if they can keep the term as short as they can, they might actually end up paying less over their mortgage term than maybe if they'd taken it out when they were 25 or 30.
So a shorter term might be beneficial. If you've been in your career for a while, maybe your salary is a bit higher than it would be had you taken the mortgage out at 31%.
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Chapter 4: What mortgage options are available for people in their 40s?
So if you are offered that mortgage to 75 or 80, but if you do have the affordability to pay it down, get your lender to check, you know, how much interest am I going to pay? Bring it up to 75 versus to 80. And you'd actually be really shocked by the difference that a couple of years later,
Depending on the mortgage you're taking out, if you're taking, we'll say, ā¬400,000 or ā¬500,000, you could save yourself ā¬20,000 or ā¬30,000 in interest.
Because a lot of people will be coming back having travelled or having worked abroad as well and be looking for a mortgage. So are the lenders more open to people taking out the first mortgage in their 40s now than they were maybe?
I think they would be at this stage, yeah, because I think it's just, you know, people are living longer as well. While we have a pension crisis, we do have people that have kind of steadier incomes going into retirement. I think the way people are working is changing as well.
In our business, we would see a lot of people that would retire maybe from their day to day traditional job, we'll call it, and then they go into maybe contracting or consultancy work. So they will still be generating an income into what we would traditionally call retirement. So I think the lenders are taking those type of things into consideration.
The one thing that people also need to consider is if you are taking out a mortgage for your own home, you need to have life cover. And as we get older, your life cover costs increase. So for anybody that will be thinking about getting it, you know, that is a consideration as well.
OK, so that might be a higher cost than it would be if you were in your early 30s or even your 20s. If you're in a couple and one of you is 37, let's say, for argument's sake, and the other one is 47, how does the lender look at that?
They will look at who is the main income earner. So what the lender really wants to see is if we give you this money, how are we going to see you pay it off over that longer term? So if it was a couple of one was 37 and one's 47 and the person who's 37 is, we'll say, going to be contributing less to the mortgage.
then they may look at, well, if we do go to 75 or 80, how are you going to pay that back? So really with lenders, they want to see repayment capacity at all different times. So people might be in a fortunate position to have the old defined benefit pensions where they'll have that regular income coming in beyond retirement.
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Chapter 5: How have mortgage lending rules changed for older applicants?
And look, none of us know what's around the corner. So I think for me, it's definitely when I talk to people, it's all about getting that balance. But if you have the disposable income, it definitely is one thing worth exploring.
Yeah, but it's about more than the disposable income, isn't it? It's about making sure you have all those bases covered. Like that's a lot to have the college fund in place, to have the emergency buffer in place before you look at paying down the mortgage.
Because then what you could do is you could have paid down your mortgage and saved all this wonderful interest and shortened the term. And then you're going out maybe looking for a loan to put your kids through education. More. expensive loan. And you're going back and you're paying 7, 8, 10%. So you're just going to put yourself back in that position.
So that's why it is good, you know, to when you're thinking about doing something with your finances, look at it in a holistic view rather than just one area in particular.
Carina, thank you very much for coming in. That's Carina Duan, who is Director of Financial Planning at Finero Financial Advisors.
The Clare Byrne Show. With Aviva Insurance.
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