In the past, customers over the age of 50 often had a much worse chance of getting a loan from the bank than younger customers. But nowadays, age alone is no longer a reason for a loan refusal, as a recent survey by Stiftung Warentest has shown.
According to the results of the sample, none of the 73 mortgage lenders surveyed required that a loan must be fully paid upon retirement. There was also only one bank that set a general maximum age for lending.
Assets play the primary role in lending
However, according to the currently applicable EU residential property credit guidelines, lenders must ensure that the borrower is able to repay his loan within the statistical life expectancy when lending. Age is less of a factor in lending than whether the borrower’s existing assets are sufficient to cover the loan.
Loan should be paid off by the 75th birthday
Therefore, according to construction finance expert Kai Weber, banks often set a latest point in time for the loan fulfillment: “Often banks take the 75th birthday of the borrower as the date by which the loan for pensioners must be repaid,” explains Weber. But that also means that with sufficient asset protection, it is no longer a problem to get a loan in your mid-50s.
Bank customers over 50 have, on average, significantly higher assets
Obviously, the banks have recognized in recent years that borrowers over 50 can also be interesting customers for loans. While 30-year-olds have on average more time to meet a loan, older borrowers have, on average, significantly higher equity. For example, 30-34 year olds in Germany have an average wealth of 17,800 euros; the 50-54 year olds, on the other hand, have an average of 115,100 euros at their disposal, as a new study by the Institut der deutschen Wirtschaft (IW) shows.
Large interest rate differentials for over-50 loans
The results of the Stiftung Warentest have shown that there are large differences in interest rates for real estate loans for over-50 bank customers. The interest rates at the most expensive of the examined credit institutions were seven times higher than the rates at the cheapest bank. For this reason, it is urgently recommended in the context of the study to obtain information about the prevailing conditions on the financial market outside of one’s own bank. Before taking out a loan, at least one or two credit brokers should always be asked about the current conditions.
Loan should be paid off before retirement
Building finance expert Kai Weber has another tip for borrowers over 50: According to the expert, they should always aim to repay the loan in full by the start of retirement. Because if a pensioner has to pay high monthly loan installments in addition to the cost of living, the often tight pension may not be enough. In the worst case, this can lead to old-age poverty.
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