Basically, you have to distinguish what type of loan you want to take out as a pensioner.
Consumer credit for retirees
If the only short-term bridging of a liquidity bottleneck is, for example, because a large purchase is in the house, a short-term consumer loan (also known as a “small loan”) can be worthwhile. However, this type of loan is quite expensive and should be carefully considered before making a decision. The interest rates are usually very high and the repayment criteria must be easy to meet on the part of the pensioner – otherwise a consumer loan in old age is not advisable.
building finance in old age
You are much better advised if you take out construction financing. The prerequisite for this is that you are a property owner and have a property that can be lent against. Then this property serves as security for the loan and the interest rates are kept within limits. However, since there is currently a lot of movement in the interest rate market, it is also absolutely necessary for mortgage lending that all parameters are checked carefully and, above all, offers are compared with one another in order to filter out the affordable and most economical offer for the pensioner.
Reasons for building finance in old age
There are many reasons for building finance in old age. In most cases, older people lend on their houses after they retire because they lack regular liquidity that they can cover with mortgage lending.
Another important reason is modernization work on the house. This does not always have to be about luxury renovations such as the installation of a pool or a conservatory. Quite often, completely unforeseen, pensioners are faced with a great deal of stress, for example when the heating has to be renewed or the roof has to be renovated. The age-appropriate conversion of the apartment or house is another reason for the capital requirement.
But buying a house is still on the agenda for many retirees. Not least because their own children now own real estate and their grandparents may want to be close by, either to be able to look after them if this should become necessary later, or because the grandparents Offer childcare for grandchildren – it is not uncommon for older people to decide that they still want to buy a property even after they have reached retirement age. In this context, there is also the desire to “downsize”, i.e. to exchange the large single-family house for a smaller apartment suitable for seniors. Even in such a constellation, there is a need for a loan.
Problems in obtaining credit: age
Age plays a major role in classic mortgage lending. So it can be assumed that many pensioners from the age of 75 will receive practically no more mortgage lending. In many banks there is a “maximum age” for mortgage lending – this is usually linked to the statistical remaining life expectancy. From the age of 80, potential borrowers usually no longer receive mortgage lending. But even younger retirees or people who are about to retire face a variety of problems when it comes to obtaining credit, often despite a valuable property.
Anyone who wants to buy a house at the age of 60 often faces the problem that although they are still employed, their salary will be lost in the future and will usually only be replaced by a lower pension. The question of whether you can still take out a loan as a pensioner depends heavily on the question of repayment – during the borrower’s lifetime. Basically, one would like to think that especially in the case of construction financing, where the property serves as security, the question of one’s own creditworthiness, which is ultimately behind the “repayability issue”, moves into the background. However, most banks see this differently.
Whether a pensioner still gets a loan is not only related to the value of his property. The rule of thumb here is: the older the pensioner is and the lower his (potential) pension is, the lower the chance of receiving construction financing. The loan for pensioners with a small pension is therefore usually excluded by the bank regulations.
Pensioner loan: This is important to note
In principle, pensioners – like all other people who want to take out a loan – should seek competent advice in order to fully understand all aspects of financing. However, pensioners often get nowhere with their house banks when they try to take out a loan. If this is the case, it is worthwhile to consult consultants who specialize in pensioners and senior citizens, who can help with arranging so-called special loans. For example, some financiers offer pensioner loans for which there is no age limit. A loan for pensioners is often designed without repayment and therefore does not burden the current liquidity excessively. The basic requirement for loans for seniors is the receipt of a pension, although the amount of the pension is not always a knock-out criterion for special loans.
The loan for pensioners is often the right choice when it comes to raising capital. However, since there are often hurdles in lending, there are alternatives to classic construction financing if you want to take out a loan as a pensioner. Taking out a special loan for seniors, in which ownership of your own property is not explicitly given up, can be just as useful as real estate annuity. In both cases, the focus is on raising capital and the right to remain in the apartment or house. In any case, a comprehensive needs analysis and, of course, a comparison of the different options is required in order to find the most economical solution for the individual life situation.
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