Real Estate Loans for Seniors: Breaking Down Age Restrictions and Banking Practices

If no age ceiling is imposed by law for taking out a real estate loan, banks nevertheless have complete freedom to select files. In theory, it becomes more difficult to borrow after age 50, but changes in society have forced banks to be more flexible.

Restrictive banking practices for seniors

In theory, age discrimination is not appropriate when it comes to home loans, but in practice, it is often different. Banks are indeed reluctant to grant loans to seniors, given the risks of non-repayment linked to age (disability, death). For these very pragmatic reasons, a certain number of banking establishments consider that the due date for loan repayment cannot occur after the borrower has reached the age of 75. Another obstacle is that, unlike first-time buyers whose income is likely to increase, the income of seniors is likely to decrease, with the drop in their purchasing power reaching up to 50%. What limits the possibility of borrowing is not so much the loan as the borrower insurance, compulsory for the subscription of any real estate loan. This point constitutes a real stumbling block, with most banks only agreeing to insure the loan until 70 or 75 years in order to protect themselves from the risk of default. If the subscriber’s profile seems too risky, the banking establishment can therefore refuse the file, or, at a minimum, apply a premium or guarantee exclusions. Age also has an impact on the cost of insurance, the increase in which can lead to the debt ratio (income – expenses ratio) being exceeded from 33% to 35% in 2021. So many reasons which can block the access to a loan for a senior.

Access to the loan varies depending on the borrower’s situation

However, the increase in lifespan has forced establishments to review their copy and demonstrate more flexibility in their practices. According to INSEE, life expectancy is currently 79.5 years for men and 85.4 years for women, which makes a loan potentially accessible to a 60-year-old senior. Another factor may encourage banks to be more tolerant: financial means and assets, which are comfortable for a certain number of retirees. These real estate or movable assets allow a personal contribution for a potential purchase, or can serve as guarantee for reimbursement. Also positive for retirees: the stability of their cash flow, which represents a reassuring guarantee for the bank. Banks have a tool at their disposal to anticipate a senior’s drop in income: the tiered loan, which adapts the monthly payments to changes in the borrower’s financial situation. They can also offer their “group contract”, likely to cover borrowers up to 65 years old. Beyond this age, mechanisms, such as insurance delegation, can take over to cover death or loss of autonomy. To optimize your chances of obtaining a loan as a senior, your main assets are to have a personal contribution and to present a guarantee (guarantee by Crédit Logement for example). But this is not easy to obtain after a certain age… Failing that, the mortgage on a property you own can be a convincing tool, the bank having the possibility of seizing it in the event of default.