Banks have long been reluctant to lend to a senior. Declining retirement income and problems with health status have often been a drag.
But the market has evolved favorably and they have adapted their credit offer to retirees .
It must be said that they represent a stable clientele with income guaranteed by the state, especially as they enjoy a longer life expectancy.
A targeted offer
In addition to the traditional solutions, banks now offer different types of credit adapted to the senior:
- Tiered loans allow the adjustment of monthly payments according to the situation and therefore pay more during the working life in order to lower the monthly payments when the retirement benefits are paid.
- The mortgage life loan avoids any refund until death.
- The bonded life loan is an intermediate solution.
Banks have innovated and offer today formulas adapted to the over 50 years . They make it possible to adapt the repayment method to the new situation created by retirement and the decline in income that it causes (around 30% for a private employee), by creating several levels of amortization. Monthly loan payments are degressive.
The first stage lasts until the end of the working life. The household depreciated more during this period. The amount is adapted to his current income.
The second phase of repayment corresponding to the retirement of the first co-borrower and causes a first drop in the monthly payment.
The third phase corresponds to the retirement of the 2nd co-borrower with a further decline in the monthly payment. The monthly payment will be final until the end.
Mortgage life loan
Crédit Foncier is the only organization to offer mortgage loans to seniors. This type of financing is based on an innovative formula that was made possible by the March 2006 security reform. However, unlike the Anglo-Saxon countries, it is hardly used in France. The mechanism is based on the principle of mortgage financing and is intended for homeowners , whether it is a principal residence, a second home or a rental investment.
It allows to obtain a credit without supporting documents by putting in guarantee the property. The amount depends on the value of housing and requires real estate expertise at the expense of the borrower.
Count between € 500 and € 1000 depending on the accommodation. The innovation is that no repayment is due until the death of the borrower (s) .
Namely: the mortgaged property must be for residential use. It is not possible to offer a garage, an office or a commercial space.
Even if it constitutes a true innovation, this solution is not without consequence on your inheritance. That’s why we advise you to take advice from your notary before you commit.
- Here is a summary of the operation.
You benefit from the protection of the Consumer Code and the SCRIVENER Act. The bank must therefore formulate its proposal in writing in a prior offer.
The Act imposes 10 days of reflection on borrowers. The repayment is made on the death of the last borrower. Proceeds from the sale will be used to repay the debt that corresponds to the principal borrowed plus interest. Two scenarios can occur.
- The sale is greater than the debt: the balance will be recorded as an estate asset and will go to the heirs according to the rules of the estate.
- The sale proves insufficient to repay the debt, the heirs have nothing to settle.
- No refund until the death of the borrower (s).
- No obligation of insurance.
- No health questionnaire is required.
- Housing remains the property of the borrowers.
- The loan is granted unconditionally.
- As the loan is not amortized, the final cost of the loan can be very significant over the years.
- The fees are particularly high.
- Heritage is losing value.
- The rates charged are clearly above the market.
- In the event of early repayment before the term, compensation must be paid (see Decree No. 2006-1540 of 6 December 2006 below).
- Inheritance is less important for heirs.E
- In the event of sale, donation or dismemberment, the outstanding balance must be paid in full.
- Order of 23 March 2006
- Article L.314-5 of the Consumer Code relating to the prior offer
- Decree of 6 December 2006 on early repayments
The classic consumer loan
Nowadays, it is not uncommon for seniors over the age of 70 to use credit. This is because the financial situation of retirees has deteriorated significantly. These more and more are also more likely to need a bank overdraft. According to the household credit observatory, 1 in 4 pensioners held a consumer credit in 2010.
Our advice: prefer a classic depreciable loan that allows you to repay the debt in a few years without reducing its wealth and keep intact the legacy.
The state of health can be a brake
The loan insurance for seniors remains a real obstacle to this day. Each loan must be guaranteed in the event of death and disability and rates after 50 years become very important. On the other hand, in the event of a health problem, there is a good chance that the company will apply surcharges. It may also in some cases be required to exclude certain risks from collateral.
Mortality disability loan insurance policies have adapted to the needs of seniors and guarantee the borrower up to the age of 90. In case of refusal of insurance, the AERAS (Insurance and Borrowing with an Aggravated Health Risk) agreement does not offer solutions to seniors. Indeed, it has age limits (50 years in case of consumer credit and 70 years in case of home loan).
It is possible to pledge an investment contract for the benefit of the bank. Obviously, this solution requires capital and prevents any use of the sum put in guarantee until full repayment of the loan. In return, the bank will not require a guarantee . Another solution is to change the beneficiary clause of an existing life insurance contract or a provident contract