Although there are no special mortgage loans for pensioners, there is still the possibility for pensioners to get a mortgage loan. It is important for the bank to get the money made available back at the end of the entire loan term. However, due to your advanced age, it is difficult for pensioners to get a loan. The bank fears an increased risk of default, statistically speaking. The increased risk then often goes hand in hand with an interest markup and poorer contract terms. Before May 2018, banks were even allowed to reject credit requests if the loan amount was unlikely to be repaid within the statistical life expectancy. Since May 2018, this regulation has been loosened by the Real Estate Credit Directive. Now pensioners who can service their credit in the long term are also getting a loan.
Conditions for a mortgage loan
Seniors are generally more likely to get a loan for a renovation or modernization than for a new building. The reason is the lower loan amount that is applied for. If the loan amount is low, the term is shortened so that the default risk of a bank is minimized. It is therefore advisable to invest as much of the equity as possible in mortgage lending. The other aspects also increase the chances of a loan approval:
- Choose high repayment
- Include special repayment option in the contract
- Take advantage of times of low interest rates
- Submit your income and expenditure accounts to the bank
- Choose a long bond in times of low interest
Let your bank or a neutral financial service provider advised on real estate loans.
Pensioners: A solvent target group
In the past, seniors were still considered a risk group that increased the bank’s risk of default, but banks today also benefit from the advantages of this age group. Pensioners have a regular income in the form of a pension that has not changed over the years. Before retirement, they often receive high salaries due to their old age. This increases the credit rating and suggests a larger amount of equity. The bank continues to use collateral as life insurance or existing real estate.
Whether retirees get a mortgage loan depends on their credit rating and creditworthiness. Since the banks use different risk assessments in their calculations, the loan requests from pensioners can always be different. However, when it comes to the question of mortgage loans for pensioners, a general rejection is no longer to be expected.