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What is the age limit for housing credit?

They say the 40 are the new 30 and the new 50 the new 40, but the age limit for housing credit is not quite so and even when the spirit is jovial, age has an important weight in hiring the housing loan.

But how do you calculate the age limit for housing credit?

To have an answer to this question there are some concepts that need to be taken into account.

Take note:

Minimum age allowed - is the minimum age allowed by the bank for the contracting of the loan and before which it is not possible to hire the credit, usually 18 years;
Maximum age allowed - is the maximum age allowed by the bank for the contracting of the loan and after which it is no longer possible to hire the credit. Varies from institution to institution;
Maximum age at the end of the loan - is the age limit for the housing credit that the older holder may have at the end of the loan. That is, by adding the age of the oldest holder to the term of the loan, in total the age may not exceed the maximum limit. In general banks the age limit for housing credit is 75 years;
Age considered – for the calculation of the term of the loan is considered the age of the oldest holder, this in the case of loans with two holders;
Product term – the different housing credit products may have minimum and maximum contracting periods. For example, a particular product may have a maximum term of 30 or 35 years, and it is not possible to contract above that period.

Thus, the formula you should consider is as follows:

Age of the oldest holder + Loan term = Maximum age at the end of the loan

Given that in most banks it is only possible to make a housing credit with an age limit up to 75 years, this indicator together with the term of the loan will be the main elements to be taken into account. For example: if the maximum age at the end of the loan is 75 years and you want to contract a housing loan with a term of 30 years, in this case you must do so up to 45 years.

If you are 55 years old, then you will already have to opt for a maximum financing period of 20 years (55 years of age + 20-year term = Maximum age at the end of the 75-year loan).

What has changed in the age limit for housing credit?

To calculate the age limit for housing credit it is also important to consider the new macroprudential recommendation of Banco de Portugal which has set new age limits and an alignment in the terms of the new housing financing contracts for a maximum term of 30 years, defining the following:

Age of 30 years or less: the maximum term of the credit is 40 years;
Age over 30 years and 35 years or less: the maximum term of credit is 37 years;
Age over 35 years: the maximum term of credit is 35 years.

But loans granted at this maturity are nevertheless very rare, even in Portugal, which is one of the European countries that allows longer terms for home loans. In December 2021, according to Banco de Portugal, the average maturity of new housing loans was 32.5 years. As for age at the end of the loan, nearly two-thirds of housing credit agreements end when the buyer is over 70.

What are the effects of the age limit on housing credit?

It is important to remember that the longer the term of a loan, the higher the total charges for the customer. This is because paying the loan in more installments implies paying interest for longer, which will make the Total Amount Imputed to the Consumer (MTIC), the indicator that allows the assessment of the total costs of a loan, to be higher than if the term of the loan is shorter.

Opting for a shorter term turns out to be the most sensible financial decision if you are able to do so. With the financial capacity to make a bigger entry and finish payments faster, it is possible to enjoy significant savings in the entire loan. And it also makes it possible to borrow housing loans later in life.

Is it possible to have housing credit at an older age?

Having a housing credit approved at a later age is not at all impossible, but to achieve favorable conditions there are some tips that need to be followed. For example, it may be useful to indicate a younger guarantor who does not complete 70 years before the end of the loan term, and who also has a stable financial situation. It also adds confidence to have more than one holder, as it guarantees greater stability - the loss of financial capacity of one of the holders, for example due to retirement, may be compensated by the second holder who can continue to secure the payment of the credit.

To apply for such a credit at an older age, it is also useful to be in a position to move forward with a higher entry in the purchase of the property, which will contribute to a lower LTV (i.e. the loan value will represent a lower percentage of the purchase value) and a rate of esfor which will be good indicators in terms of risk, giving the Bank more arguments to rely on the security of the operation.

Age limit for housing credit.

Probably not. For each person, the right time to hire this type of credit will come at different times of life. Several aspects need to be combined - being in a stable and favourable professional situation, achieving a necessary effort rate to maintain the loan payment, and even finding the right housing to take this big step.

In theory, most financial entities allow housing credit to be contracted from the age of 18, and can complete the payment of housing credit with an age limit up to 75 years. However, in practice, the age to hire this type of credit is usually between 25 and 55 years. Why?

From the outset, because a very young person may not yet have the stability necessary to commit to such a high investment. Banks are looking for people with stable financial situations and solid jobs, something some people under the age of 25 may not have yet. Usually between 25 and 55 years is when two important factors are combined: the professional situation in general is more stable, and as if it is far from 75 years you can still hire long deadlines and allow monthly instalments.

In general terms, stick to this idea: the higher your age, the shorter the term of housing credit you can hire. On the other hand, it should also be in a better financial situation than at an earlier age, which will allow you to approve credit more easily and meet its burdens. In one scenario or the other, there are always advantages.

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