Mortgage for the pensioner – how to increase the chances of getting it?
In 2018, the average amount of disability pension due to total incapacity for work was USD 1653,06 gross, and the minimum amount was USD 1029.80 gross. Is it possible for a pensioner to pay with such a low income? Here is a comprehensive guide for pensioners who would like to realize the dream of having their own apartment or house with the help of the bank.
What amount of pension can you get a mortgage?
In the case of mortgage loans, banks are friendly to people who earn a steady income from their employment contract, retirement or disability pensions. Obviously, they require that this income be high enough. They must be sufficient to cover current expenses and future repayment of loan installments.
If you get a minimum or average disability benefit and you have no other source of income, then unfortunately you will not get a mortgage. Lenders assume that just maintaining a household costs you minimum USD 1200. To be able to count on any, even a small loan, you must receive an amount at least about USD 1,000 higher each month.
A mortgage for a pensioner and his creditworthiness
The fact that you are a pensioner has no impact on the course of your credit procedures and formalities. They will look just like any other mortgage customer. As soon as you submit an application for financing, a bank analyst will assess your economic situation and creditworthiness. To this end, it will check your income, debt, past debt repayment history, or the number of dependents. On this basis, it will assess whether you show, and if so, which creditworthiness. The latter is nothing more than the maximum amount of credit the bank will be willing to lend to you.
Remember that if you are married to a community of property, you take the mortgage together with your spouse. If you work, your chances of a positive credit decision increase, but if you are unemployed, the likelihood of getting a loan becomes low.
Also, be aware that the bank will take into account all your and your spouse’s credit and financial obligations. Your creditworthiness will be diminished not only by repaid equipment bought in installments or loans and credits, but also by the account limit and credit card – even if they are not used at all.
What kind of benefits can a pensioner get from a mortgage?
Survivors’ pension or due to partial or total incapacity to work – each of these types of benefits may be temporary or permanent. When you apply for a mortgage, the bank will take into account the full amount of the disability pension, but only if you have been granted an indefinite period. If it does not meet this criterion, then regardless of its amount, your loan application will be rejected. Banks never grant loans to people with a social pension. The exception is when you have high income from other sources that will allow you to prove your credit standing, in addition to your timely pension. Also when the term pension ends at retirement.
Mortgage for pensioners and additional work
It is rare for a pensioner to receive a loan high enough to finance the purchase of an apartment or house construction. Such a situation is possible only if, in addition to the disability benefit payment, the client receives other, stable and documented income. It can be a monthly remuneration for an employment contract or civil law contract. It is important that it has a constant, repeatable character. It is worth emphasizing that pensioners receiving a benefit due to their inability to perform work, may earn an additional up to 70% of the average monthly salary. Only exceeding this limit may cost them the loss or reduction of the pension.
How can a pensioner increase his creditworthiness?
The maximum loan amount that the bank will be willing to grant you depends on your income and the installments of the potential mortgage. The higher your earnings and lower installment, the more money you can borrow. This means that you can improve your credit standing by increasing your income or lowering the installment amount.
Your situation will be improved not only by an additional source of income, but also by joining the loan with a co-applicant. He doesn’t have to be related to you, but it’s important that he has a stable income and a good credit history. The lender will check it as carefully as you do. If he has a bad credit history, high debt or several dependents, joining him in the application may even harm you.
Increase own contribution
When applying for a mortgage, you must make an own contribution of at least 20% of the value of the real estate being credited. By purchasing a low own contribution insurance, you can have a 10% own contribution. If you can, provide a higher amount that will reduce the size of the loan and thus the amount of monthly installments.
Choosing a long loan period
The easiest way to increase your creditworthiness will be for you to choose the longest possible loan period. You can take a mortgage for up to 35 years, but only if the final installment is paid before you are 70 (75 or 80 – depending on the bank). If you are over forty, submit an application to an institution that applies the 80-year age limit and will allow you to benefit from the maximum funding period.
As a pensioner, it will be difficult for you to get a mortgage for several hundred thousand dollars. You have a good chance for a positive credit decision when you need a relatively small amount to finance the purchase of an apartment, and you can take advantage of a long loan period. For example, with a 30-year loan of USD 50,000, your monthly installments would be just over USD 200. In this case, an income of just over USD 2,000, assuming no other loan commitments and dependents, could open your way to a home loan.