How old is too old for a home loan?
Some home loans will extend beyond retirement age, so how will you repay them? (Photo: 123RF)
Mortgage advisers say it is not unusual for age to be a hurdle for some borrowers.
How old is too old for a home loan?
One woman who argued that she should not have been allowed to take out a mortgage, given her age and that of her husband, has lost her complaint to the Banking Ombudsman - and mortgage advisers say it is not unusual for age to be a hurdle for some borrowers.
The Banking Ombudsman said the woman and her husband first applied for a home loan in 2020, when they were aged 56 and 53. In 2022, they agreed to take out loans worth $479,000.
But in 2025, the woman's husband died, and she claimed the loan was irresponsible and should not have been approved.
She said the bank had not considered her and her husband's ages, and the 30-year loan term.
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She said they had never intended to work past typical retirement age or to increase their repayments.
The ombudsman looked into the case, including the bank's notes from the time, and said the bank had considered the couple's age and future plans, as well as discussing with them how they planned to repay the loan.
"We also reviewed the bank's affordability assessment. The bank verified income and expenses, applied conservative calculations and included reasonable buffers.
"There was a reasonable surplus of income over expenses and the bank made inquiries about likely changes to income. We found the bank had reasonable grounds to believe the couple could meet repayments without suffering substantial hardship, having regard to any likely changes in income."
The complaint was not upheld.
Link Advisory head Glen McLeod said he saw many borrowers in that sort of situation.
He said banks and lenders would have different policies for loan terms that would take people past the age of 65.
"Some set a maximum age of 65, while others may allow terms to extend to 70 or even 75.
"The key consideration is always the client's exit strategy, which is discussed as part of the lending process. An exit strategy outlines how the loan will be repaid, and provides confidence for both the client and the lender.
"This could include using KiwiSaver funds at retirement, selling an investment property or downsizing their home.
"Ensuring clients fully understand what they're borrowing and the long-term implications is an essential part of the Responsible Lending Code. This approach helps protect clients, and ensures lending decisions are made with care and transparency."
Another adviser, Jeremy Andrews from Key Mortgages, said banks could not discriminate based on age, but agreed they had to follow responsible lending rules.
"Often we see banks declining first-home buyers nearing retirement age loans that are similar or sometimes even lower than their rent payments."
He said that was because, if someone needed a longer-loan term to make the loan affordable, they may have to stay in full-time work for the duration.
"That said, there are plenty of mitigants that banks can consider case by case, which are referred to as exit strategies.
"As part of a client's affordability analysis, lenders and mortgage advisers should investigate and consider whether clients are in sedentary jobs and able to continue work beyond retirement age. Some banks can then consider up to 70 years of age, others longer."
He said other things borrowers could think about were whether they could increase payments once dependents left home or clear other debts to increase their ability to pay off the home loan.
Loan Market adviser Karen Tatterson said lenders and advisers had a responsibility to ensure a client had repaid their loans by the time they retired, or that they had an exit strategy.
"As a general rule of thumb, banks consider 70 years of age as the end date to a loan term," she said. "There are other considerations too - KiwiSaver, overseas superannuations and pensions, and the impact these will have in terms of repaying the loan, once they are able to access these funds.
"I understand, in many instances, the longer loan term is requested by clients for the purpose of keeping the loan repayments at a lower value for affordability reasons, but the risk of this must be discussed.
"The other consideration here is whether the clients received any advice regarding the risk of taking out a mortgage at their age, and were offered any income protection, mortgage protection or life insurance.
'In my mind, this is an important aspect of the process and, in this instance, if the male partner had some life cover, this may have gone a long way to paying off all or part of the home loan.
"This would have made the ongoing home loan repayment affordable for the surviving partner."
What you need to know if you're applying for a home loan as an older borrower
- Have a plan - will you work until the loan is repaid or do you have another way to pay it off?
- Be prepared to have a shorter loan term
- Different lenders may have different approaches
