Is it impossible to get a mortgage past your retirement age?

31 posts in this topic

We've bene looking into buying our first home here in Germany. Our banker has stated that the expectation is that the loan will be paid off prior to the loan bearer entering retirement. The impression (at least from our bank) is that they would not offer us a loan that was outstanding past our retirement date (I.e. if you're 20 years out from retirement, they won't offer a loan that can't be paid off in 20 years.)

 

Question: Is it impossible to get a loan in Germany, that you are still repaying after retirement? 

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Afaik for the bank it is a huge risk if you should stop paying after you retire (because they can't easily evict you). I heard that it is possible to get such a loan if you can prove to the bank that you own another place to live (e.g. another flat/house) which you could use in such a case.

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My colleague bought a house recently. She and her husband are around 50 and will still be paying off the mortgage after retirement, so yes it’s possible. They don’t own other property.

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Yes, it's possible. Loan on my apartment runs till I'm 69. Loan on the house I just bought runs till I'm 85. 

 

Those are projections of course, as no-one can say what the interest payment will be after the fixed-rate term (10 and 15 years respectively) or how much sondertilgung I'll pay in the meantime.

 

Sounds like your bank just doesn't want your business. Get a mortgage broker. Also check if there's a Genossenschaft in your area, they're generally a better deal than the banks but don't use brokers so you need to apply directly.

 

In any case, you'll have to show what pension you can expect both from Germany and elsewhere, if that applies. I lost out on one apartment waiting for the UK pensions office to send my info through, so maybe you want to ask for such things ahead of time if you're serious about it.

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Like others have said, find another banker/broker.  In the US this would be age discrimination and illegal.  Underwriters are not fortune tellers; they have no way of knowing what will happen next week any more than 20 years from now.

But, to answer your question: the mortgage business boils down to income vs. expenses, not net worth vs expenses.  Underwriters want a consistent, reliable source of income i.e. pension.  You might have millions invested in Tesla stock, but that is not income.

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In Germany I always felt the banks were far more interested in the loan to value ratio than the ability of the mortgagee to repay (because that can change easily within the lifetime of such a long loan), so they could be reasonably sure that even in the event of default, they'd be able to recover their loan.

 

 

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21 hours ago, catjones said:

Like others have said, find another banker/broker.  In the US this would be age discrimination and illegal.  Underwriters are not fortune tellers; they have no way of knowing what will happen next week any more than 20 years from now.

But, to answer your question: the mortgage business boils down to income vs. expenses, not net worth vs expenses.  Underwriters want a consistent, reliable source of income i.e. pension.  You might have millions invested in Tesla stock, but that is not income.


if you have millions invested in <Tesla> enough banks are very happy to use part of those investments as collateral and your ability to pay back from your income alone plays a lesser role in approving the loan. This is standard practice, also in Germany. Besides, dividends, rentals, etc count as income.

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3 hours ago, mtbiking said:

banks are very happy to use part of those investments as collateral

that's not accurate.  such investments are, by definition, liquid.  the house itself is the collateral.  ostensibly, the down payment covers the bank's risk. the calculation is income vs expenses not assets vs expenses.  see: Enron.

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1 hour ago, catjones said:

that's not accurate.  such investments are, by definition, liquid.  the house itself is the collateral.  ostensibly, the down payment covers the bank's risk. the calculation is income vs expenses not assets vs expenses.  see: Enron.


No, it’s accurate. You can use shares or fonds as collateral to get a loan to buy property: each asset class has a factor attached to it (40%, 60%, 80%, etc) which regulates the amount the bank will give you for it at current evaluations. Riskier assets have a smaller factor - Tesla is Risikoklasse D (up to 50%). Like any other collaterized asset, you relinquish the right to sell it without authorization of the bank (and give them the right to sell in case of debt delinquency) - it becomes illiquid. 

 

Anyway, this point is tangent to the topic and I doubt it helps the original poster. For the average employee with some €€ saved  in the bank and no other equity it’s true that the lending institution only cares whether they earn enough, safely enough and for long enough - sehr langweilich, a mortgage advisor once told me.

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1 hour ago, mtbiking said:

You can use shares or fonds as collateral to get a loan

What you are describing is a Line of Credit, not a mortgage.  You can use a LOC for a purchase (such as a home), but it is not a conventional mortgage.  A conventional mortgage has a fixed interest rate and term, whereas a LOC is variable interest and the term of payments is set by the lender much as a credit card.

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Shares can be considered as part of the deposit on a mortgage (Eigenkapital):

 

"Dem Bauherrn beziehungsweise Immobilienkäufer stellt sich die entscheidende Frage, ob für die Berechnung der Fremdfinanzierung das Wertpapierdepot mit seinem Aktienwert vom Financier als Eigenkapital anerkannt wird.

 

Die Antwort lautet JA, wobei dem Bauherrn bewusst sein muss, dass damit ein finanzielles Risiko verbunden sein kann, aber keineswegs sein muss."

 

It goes in to say that the shares are left to mature until the date the mortgage is to be cleared and should be sold at that stage to clear the remaining debt. Of course if the mortgagee has made excess payments during the lifetime of the mortgage this may not be necessary.

 

https://www.huettig-rompf.de/baufinanzierung/faq/stellen-aktien-eine-form-des-eigenkapitals-fuer-eine-baufinanzierung-dar/

 

Edit: this is a bit like an endowment mortgage. That's where you take out an insurance policy to clear the expected lump sum at the end. These types of mortgages landed a lot of people in the UK and Ireland in trouble as the policy often yielded far less than originally expected.

 

You wouldn't want to be relying too much on your shares doing all the heavy lifting to redeem your mortgage as a market crash just before mortgage redemption could be catastrophic, leaving you homeless. 

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1 hour ago, murphaph said:

Shares can be considered as part of the deposit on a mortgage (Eigenkapital):

 

"Dem Bauherrn beziehungsweise Immobilienkäufer stellt sich die entscheidende Frage, ob für die Berechnung der Fremdfinanzierung das Wertpapierdepot mit seinem Aktienwert vom Financier als Eigenkapital anerkannt wird.

 

Die Antwort lautet JA, wobei dem Bauherrn bewusst sein muss, dass damit ein finanzielles Risiko verbunden sein kann, aber keineswegs sein muss."

 

It goes in to say that the shares are left to mature until the date the mortgage is to be cleared and should be sold at that stage to clear the remaining debt. Of course if the mortgagee has made excess payments during the lifetime of the mortgage this may not be necessary.

 

https://www.huettig-rompf.de/baufinanzierung/faq/stellen-aktien-eine-form-des-eigenkapitals-fuer-eine-baufinanzierung-dar/

 

Edit: this is a bit like an endowment mortgage. That's where you take out an insurance policy to clear the expected lump sum at the end. These types of mortgages landed a lot of people in the UK and Ireland in trouble as the policy often yielded far less than originally expected.

 

You wouldn't want to be relying too much on your shares doing all the heavy lifting to redeem your mortgage as a market crash just before mortgage redemption could be catastrophic, leaving you homeless. 

 

The quote you gave is vague (to me).

Likewise, the term "shares".  Equities are sold in shares, but they don't "mature".  Not sure what you mean there.  If the lender requires a 20% down payment, the amount of that down payment is a real number, not some variable according to market price.

As for mortgage insurance, the lender would make this requirement to reduce their risk in case of default.

 

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Mature here simply means (hopefully) go up in value and be sold to provide cash to redeem the mortgage.

 

The fact is, a portfolio of shares (that's British English for "stock") can be used as part of the Eigenkapital (deposit) requirement to secure a mortgage by at least certain lending institutions in Germany.

 

In Ireland a bank would most likely laugh at you for asking could you do that, even if the shares were all blue chip, but in Germany it's possible.

 

By the way, mortgages can absolutely have variable interest rates. In many countries variable rate mortgages are the norm, with people often "fixing" for the first x years then allowing the interest rate to fluctuate after they have paid a decent chunk of the capital back.

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yep - and here’s what DrKlein has to say about it.

 

Quote

4 - Kredit für den Hauskauf: Aktien als Sicherheit 

 

Alle zur Verfügung stehenden Vermögenswerte akzeptieren die Banken als Sicherheit. Haben Sie unterm Kopfkissen nicht so viel Bargeld anhäufen können, sind Aktien eine gute Möglichkeit, sie als Sicherheiten bei der Bank zu hinterlegen. Aktien werden in der Regel nicht zu 100 Prozent von den Banken akzeptiert. Viel zu hoch ist das Risiko, dass sie mit der Zeit einen Werteverlust erleiden. Um dieses Risiko einzugrenzen, schaut sich die Bank die Aktien ganz genau an. Bundeswertpapiere beispielsweise gelten als sehr sicher. Daher werden sie häufig zu 100 Prozent als Sicherheit hinterlegt. Staatsanleihen mit einem Rating von AAA oder AA sind ebenfalls gern gesehen. Bei allen anderen Aktien werden häufig Abschläge einkalkuliert. Das bedeutet: Sie werden nur zu 60 oder 80 Prozent beliehen. Besteht bei den Aktien ein höheres Risiko, werden sie sogar noch geringer bewertet.

 

Werden Aktien als Sicherheit bei der Finanzierung für den Kredit hinterlegt, werden sie quasi eingefroren. Sie bekommen einen Sperrvermerk, sodass Sie als Darlehensnehmer nicht mehr an die Aktien herankommen. Einzig die Bank kann Auszahlungen fordern. Allerdings muss diese Forderung begründet sein. Das ist dann der Fall, wenn sie beispielsweise Zahlungsausfälle nachweisen kann.

https://www.drklein.de/kredit-fuer-hauskauf.html

 

 

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9 hours ago, murphaph said:

by at least certain lending institutions in Germany.

 

my guess would be Deutsche bank.

 

9 hours ago, murphaph said:

in Germany it's possible.

I wonder what the recourse is if the company suffers a major downfall, bankruptcy or failure.  If any bank offered me a loan under a shares condition, I would run the other way and save the future legal fees.

 

 

9 hours ago, murphaph said:

mortgages can absolutely have variable interest rates.

Clearly, which is why I commented on "conventional" mortgages.

 

9 hours ago, mtbiking said:

Alle zur Verfügung stehenden Vermögenswerte akzeptieren die Banken als Sicherheit.

 

Statements like this are irresponsible in reference to reputable lending institutions.  Applying pawnshop attributes is flippant and insulting.

 

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catjones, DrKlein is one of the major mortgage brokers in Germany and what they write just corroborates what I posted originally and, incidentally, learned from experience as well as from a few acquaintances. But I see you insist on nitpicking: it doesn’t matter - we’re not helping the original poster one bit and those with significant assets usually do their own homework - i.e they engage experts.
 

I reiterate that you can use part of your stock portfolio as collateral to guarantee the best possible loan conditions when buying a house. This has some advantages as well some risks. Anyone in the position and disposition to take advantage of the option should contact starshallow’s office (or DrKlein’s, or another) to confirm this and through their guidance avoid unserious offers, and otherwise ignore this thread.

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Also, variable rate mortgages are conventional mortgages. There's absolutely nothing exotic about them.

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On 8/12/2021, 6:16:52, mtbiking said:

DrKlein is one of the major mortgage brokers in Germany

 

I'm not impressed.  Take your bitcoins (asset) and buy a house.  You can believe whatever you want, but his sage advice defines financial logic and mortgage norms.  Maybe he has an impressive German degree that you admire.

 

On 8/13/2021, 4:30:12, murphaph said:

Also, variable rate mortgages are conventional mortgages. There's absolutely nothing exotic about them.

 

Oh, please.  Conventional is based on or in accordance with what is generally done or believed.  Do a search on "conventional mortgage" and ARM rates don't even show up.  Relatively speaking they are (your word, not mine) exotic.  Given today's rates, an ARM makes little sense.

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On 8/10/2021, 10:58:53, burningkrome said:

 

 

Question: Is it impossible to get a loan in Germany, that you are still repaying after retirement? 

 

No the law was changed a few years back, all mortgages must end by your retirement age (67)

 

Real pain in the ass if you're trying to get a mortgage if you're older.

 

It does keep house prices down though!

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