“Can I still get a mortgage at my age?” Many people wish to continue living independently for as long as possible, and the government encourages this. Nevertheless, I often hear that there is uncertainty regarding the possibilities of taking out a mortgage later in life. In this article, you will read about what is possible and what you should take into account.
Mortgages and age
Do you wish to take out an entirely new mortgage? Nowadays, these must be repaid within 30 years on an annuity or linear basis to qualify for mortgage interest deduction. This is also possible later in life, as there is no maximum age for taking out a mortgage.
How does it work?
Starting ten years before your state pension (AOW) age, mortgage lenders take your pension income into account. This is the primary difference compared to taking out a mortgage at a younger age. In principle, a maximum term of thirty years applies to everyone, but a shorter term may be advisable. This prevents your heirs from inheriting a high mortgage debt.
What should you look out for?
It is important to carefully consider your monthly costs and whether they will remain affordable after your retirement. We are happy to help you estimate what your pension income will look like and whether a mortgage is financially feasible.
Pension income and mortgage inheritance
Your age in itself is not an obstacle to obtaining a mortgage, but your pension income can influence how much you can borrow. This income is usually lower than your salary before retirement, which also results in a lower maximum mortgage.
In addition, it is wise to consider the consequences for your heirs. If you pass away before the mortgage is repaid, they inherit not only the house but also the mortgage debt. This does not have to be a problem, but it is sensible to discuss this with an advisor beforehand. There are ways to ensure that your heirs are not faced with unexpected financial burdens.
Using savings wisely
You might consider using part of your savings for a new home instead of keeping it in a savings account with low interest. This can lower your monthly costs and is often financially more beneficial than saving. At the same time, it is wise to think about other future expenses. You may want to keep part of your assets in reserve for healthcare costs or to provide financial support to (grand)children.
Utilizing home equity
In addition to savings, you can also look at the equity in your current home. This equity can serve as an investment in a new home and lower your monthly costs.
Would you prefer to stay in your current home? Then you can also utilize the equity as a financial buffer for later. This can be useful for supplementing your pension income or paying for healthcare costs. There are various options available to release (part of) the equity.
Income now and later
When calculating your mortgage options, the level of your pension income is also taken into account. This is usually lower than your current income. If you are already retired, your state pension (AOW), employer’s pension, and any private pension you have built up will be considered.
If you are not yet retired but that moment is approaching, it is important that the mortgage costs remain affordable even after your retirement.
Mortgage interest deduction and tax
Your pension income determines not only how much you can borrow but also how much tax you pay. Once you receive a state pension (AOW), you pay less tax. This also means you receive less mortgage interest deduction. Additionally, you often fall into a lower tax bracket than before retirement. As a result, net mortgage costs may be higher.
Interest-only mortgage
Do you want to keep monthly costs low? Then you can choose to continue (part of) your mortgage as an interest-only mortgage. If you have an interest-only mortgage from before January 1, 2013, you may, under certain conditions, transfer it to a new home while retaining the mortgage interest deduction.
Think in possibilities
As you can see, there are plenty of mortgage options available even later in life. Would you like to know what is possible for you? Then please schedule a non-binding appointment.
