Does Starting a Mortgage Later in Life Make Sense?

Some older adults might wonder. They also might wonder if the bank will want to lend to them.

There are plenty of good reasons for older adults to buy homes. People over 60 make up about a third of the population of home buyers. That’s because starting a mortgage and acquiring a deed can be a good move for an adult of any age. Yes indeed, banks welcome older adults as mortgage applicants.

Should a Senior Applicant Get a 30-Year Mortgage?

There is no upper age limit to mortgages. Under the Equal Credit Opportunity Act, someone who’s 95 is entitled to a mortgage. That includes a 30-year mortgage. Most people who get mortgages don’t keep them 30 years; they refinance, they sell. Sometimes they fail to make payments, and sometimes they pass away with loan balances. For lenders, these scenarios are all in a day’s work.

Of course, as a practical matter, an older adult who prefers a 15-year timeline can choose that shorter mortgage term.

Either way, rest assured that if you’re of sound mind and have the income and assets to qualify, you are welcome to a mortgage. And taking out a mortgage can be a sound decision for an older adult who is prepared to make a solid down payment and care for a home.

Is It Harder for a Senior Applicant to Be Approved for the Loan?

Fair housing laws aside, maybe you feel as though you really have to work to prove your creditworthiness as an older applicant. If so, you’re not imagining things.

Older applicants face higher denial rates when they go to finance — or even refinance — a home, according to multiple studies:

• The Urban Institute published research in 2021 showing that people aged 65+ face more application denials. The difference is significant — especially in times of high interest rates.

• Natee Amornsiripanitch published a noteworthy white paper in February 2023. It showed a higher rate of denied applications for older adults.

• Amornsiripanitch published a new paper in March 2023. It indicates that lenders assign higher interest rates overall to their senior applicants who do get approved.

It seems clear that it really is tougher for older adults to get the mortgages they want.

If Mortgage Lenders Can’t Discriminate Against Older Adults, Then What’s Going On?

First off, older adults could be doing less comparison shopping before applying for loans. Also, older adults may be earning less as they start living off retirement distributions and Social Security payments. And lenders may treat stock market returns from investment accounts as less dependable than wages.

Also, lenders rank older homeowners as statistically more likely to fall behind on home maintenance. Why do lenders care? Because the home is collateral for the loan. If the home could lose value, then a lender will want the applicant to show more assets to offset that risk.

Then there’s the elephant in the room. The borrower’s expected life span. That’s a legitimate risk factor to a lender, even though the applicant can’t be turned away for being older.

But take heart. Age cuts both ways. Older adults tend to have well established credit profiles — a factor than lenders deem a strength.

The Fair Housing Act prohibits discrimination but makes exceptions for state or federal programs to assist elderly persons. It also allows 55+ and 62+ housing providers to reserve housing for older adults.

Ready to Apply? Get a Consultant on Your Side.

This column is not personalized financial advice. For that, you need to sit down with an experienced mortgage consultant. We hope this brief exploration of mortgages for seniors helps you frame the right questions to ask.