Falling income, rising homeowner’s insurance costs… Taking out a loan after retirement can be complicated. But solutions exist.
To get closer to the sea, buy a second home, convert it into a main residence or embark on rental investments to strengthen your assets… when it’s time to retire, many French people dream of a new construction project.
But then finding financing can become more and more complicated as you get older. Nothing is completely closed, though the majority of traditional banks set the maturity limit for the loan at 70 or 75 years, notes Ccile Roquelaure, spokesperson for the broker Empruntis. It must be said that the older you get, the greater the risk of death.
The higher cost of insurance
According to the National Institute for Demographic Studies (INED), this risk increases exponentially from age 20, by about 8 to 10% from one age to another, a doubling every 8-9 years. year. A fact that banks inevitably know: the older you get, the shorter your lifespan. It will therefore be rarer to have financing over 20 years when you are over 60, confirms Ccile Roquelaure. From the age of 50, financing over 20 years remains marginal, the banker would rather ensure that the project is financed over 15 years.
And even for loans with a shorter term, borrower insurance can weigh heavily. It is a real difficulty after the age of 50, develops Ccile Roquelaure. The risks of a health pin become more important, and unless you borrow over less than 10 years, you do not benefit from the end of the health questionnaire (The Lemoine Act removes it for certain loans repaid before the borrower’s 60th birthday). It is therefore necessary to fill out a health questionnaire, and in case of even a minor concern, the cost of the insurance increases.
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A decrease in income necessarily taken into account
But the borrower’s health is not the bank’s only concern. necessarily income also plays an important role in the loan institution’s decision. But the transition to retirement often signals a drop in income, with an average loss of 33.40% for a non-executive, according to the Pensions Orientation Council (COR) annual report published in September 2022.
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Depending on the age at the end of the loan, the banker will calculate your interest rate according to your business income or according to the simulations of your retirement pension. A 55-year-old borrower who takes out a 10-year loan will thus probably be able to base the loan on his income as an asset, which will probably not be the case at the age of 60. The banker must know what your income will be during the repayment of the credit to be sure that the monthly payment will not be a problem for you, develops Ccile Roquelaure. If your retirement simulations show that you will lose 40% of your income, the bank will not lend you the same amount than if you had 100% income. However, the calculation will be slightly different in connection with a rental investment, as it is usually the rent that must pay a large part of the credit.
If the pitfalls exist, don’t worry: it’s still possible to borrow even when you’re close to retirement. Banks are very happy with fifty-somethings and above because they have a history and they have often already repaid credit, confirms Ccile Roquelaure. While young people have the advantage of income growth, seniors have a reassuring side for the banks, they are often good customers.
Some banks also offer multi-line loans, which allow for e.g maximum repay the capital during the activity period to lower the monthly benefit at the time of retirement. The goal is then to find the right time to borrow, in order to optimize the duration of the loan as much as possible and the share of the active income to borrow on the best terms.
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