Personal finance: your queries answered

DOMINIC COYLEanswers readerss queries

Prospects of getting a mortgage at 54

Q

I’m 54 and seeking to buy a home.

I understand that financial institutions restrict the term of a mortgage to the point when the holder reaches the age of 70. In my case that would mean that I could have a maximum term of 16 years.

Have you any advice to offer to someone in my age group seeking a mortgage?

- Mr PC, e-mail

A

It’s not necessarily what you want to hear but there is little flexibility available to you. If anything, the current financial crisis has ensured that banks are more careful than they have been for a generation.

Kevin McNerney, who is a broker and member of the Trusted Advisor Group, says there is no way around the 70 year limit “as it forms part of the banks’ lending criteria and is certainly an area where they would show no leeway at all”.

In fact, you would do well to get a lender to agree to a 16-year mortgage in your position – ie, up to the age of 70. Some, McNerney notes, would restrict you to a maximum age of 65 – the standard retirement age – limiting you to a repayment term of just 11 years.

And, age aside, the criteria on which you will be assessed are precisely the same as for any other applicant regardless of age.

Those, too, have tightened up. “The banks are looking at mortgage applications in a lot more detail than before and going through things with a fine- tooth comb,” says McNerney.

“The main thing is that people are showing a good level of savings being put aside each month and also that they are keeping their current account in good order and not going in to their overdraft all of the time or having any missed payments.”

The broad criteria that are considered, obviously, are: salary/employment, available deposit and repayment ability.

On salary, it is no longer good enough to provide evidence of what you earn.

Lenders are regularly doing background checks on employers, making sure, for instance, that there have been no recent job losses. Some are even checking employers’ financial performance through the Companies Office.

While public service employees are still viewed more favourably because their employment is seen as more secure, previously sanctioned borrowings for regular overtime for people such as gardaí and nurses is more tightly constrained.

On deposits, the relaxed rules of the boom years are gone and deposits of between 10 and 20 per cent will be sought depending on location and financial circumstances – and increasingly they will want evidence that this has been saved rather than appearing suddenly as a windfall gift.

In addition, the location of the property itself is increasingly becoming an issue.

McNerney says that, on properties outside the main urban centres, some banks will not lend more than 80 per cent of the sale price.

In new developments, certain institutions will be wary unless at least three-quarters of the houses have already been built and sold before considering an application.

Similarly with people caught in property chains, apparently a number of lenders will not even consider an application for a new mortgage until contracts have been exchanged on the home being sold which seems a bit unreasonable.

For investors, I’m told the rules are even tighter, especially in relation to allowable income.

This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into.

Please send your queries to Dominic Coyle, QA, The Irish Times, 24-28 Tara Street, Dublin 2. E-mail: dcoyle@irishtimes.com