Am I too old to invest?

There’s no hard age limit to buying an investment property. It’s not uncommon for investors in their 60s to get approved for a mortgage. As a mortgage adviser, I’ve even organised mortgages for 65-year-olds.

But if I had to say, once you get to 70+, that’s when it starts getting very hard. Not impossible, but hard.

But I still get questions from Kiwis asking, “Am I too old to invest in property?” or, “Am I too old to get a mortgage?”

Even some 50-year-olds ask me if they’ve left it too late.

If you’re an older Kiwi, sure, there is a bit more admin involved. The banks still need to lend responsibly. But it’s still possible, so let’s see what you need to know as an older New Zealander who wants to invest in property or get a mortgage.

How old is too old to get a mortgage?

The bank has a responsibility to make sure you can afford debt you take on.

So, at what sort of age does it become harder?

If it’s your first home, we're talking 50 to 60 years old. But if it’s for an investment property, it’s not so much of an issue.

Why? Because if times get tough ... you can always sell it.

But banks are loath to make you sell a property if you’re an owner-occupier – they don’t want to be kicking older Kiwis out of their homes if they can’t pay the mortgage.

What are the pros and cons of getting a mortgage as an older Kiwi?

Let’s dive into the pros and cons of investing as an older Kiwi.

The good thing about investing as an older Kiwi is you still get to build your wealth right up past 65. So, even if you didn’t invest in property when you were younger, maybe you still can.

However, you will need to spend a little bit more time explaining your plan to the bank. They want to see a clear exit strategy. When do you plan to sell the investment property and how will you pay back the mortgage?

The other risk is that the older you are when you buy, the less time you potentially have in the market. That creates risk for an investor. If house prices fall in the short term, you might need to sell at a loss. This could put pressure on your exit strategy and overall financial plan.

What makes it harder to get a mortgage as an older Kiwi?

When banks lend you money they want to know when you can pay it back.

Let's say you’re 60 and buying your first home. You take out a $500k mortgage on a 30-year term. The weekly mortgage repayment on that could be $700 a week.

If you retire in 5 years, you might just get superannuation. That won’t be enough to cover the mortgage repayments (let alone anything else to support yourself).

The bank won’t like this. They only want to lend you money if you can genuinely afford it. If they can see that you’ll struggle in the medium term, they’ll be cautious before they give you a mortgage.

How do I still get a mortgage as an older Kiwi?

Now let’s talk about what you can do to try and get your mortgage application across the line as an older New Zealander. Here’s what the bank will consider:

#1 – Your job

If you’re 65-70, the type of job you have will impact the bank’s decision. Many banks allow us to take income up to the age of 70, especially if you work an office job.

But if you’re a labourer or do physical work … it’s unrealistic you’ll work past 65, so they’ll be more cautious. However, someone working in a desk job could realistically work past 65, so this would help your mortgage application.

#2 – How much debt you already have

To be approved as an older Kiwi you really do need to have no (or very low) debt.

If you’re 60 and mortgage-free on your own home, the bank will consider you for an investment mortgage.

I’m a mortgage adviser and have organised interest-only mortgages for 65-year-olds. That was for investors purchasing a rental property.

But if you’ve already got a large mortgage, the bank is less likely to give you another mortgage.

#3 – How many other assets you have

The bank will take a kinder view if you have other assets.

For instance, do you have shares you could sell to pay off some of the mortgage if you need to? Do you have any other investment properties you can sell?

These can be a big plus in the bank’s eyes. It decreases their risk and increases the chance of getting the money you want.

What is an exit strategy?

The bank will also want to know what your exit strategy is.

This is where you explain to the bank how you’ll pay back the mortgage in a shorter time.

When you’re 30, taking out a 30-year mortgage, the exit strategy is: “I’m going to be earning an income for the next 30 years, so I’ll slowly pay off the mortgage.”

But when you’re 60, it’s not that simple. You need to have a more sophisticated plan.

You’ve got less time to pay off the mortgage when you’re 60 or 65. At some point, you are going to stop earning and retire. So, the bank needs to have a bit more reassurance about how they are going to get their money back.

You’ll get your mortgage broker to explain your exit strategy at the application stage.

It could sound like: “At some point I’ll sell another property I own and make a bulk payment against this property.”

Or maybe: “I have $1m in shares, at some point I’ll liquidate that debt and pay off the property.”

This is where other factors like debt and assets come into play.

I helped Mabel get a 20-year mortgage when she was 67. She had 4 rental properties already and her exit plan was clear. She would work for 3 more years, then she would sell some of those rental properties to pay off the mortgage.

The bank said “yes”. That’s the value of a clear exit plan.

There are some things the bank won’t accept:

• An inheritance you haven’t received yet
• A divorce settlement you haven’t got yet
• Any anticipated bonus from your job

Basically, the bank won’t accept anything that is coming; they want to see what you already have.

What can you do if you are applying as an older person?

How do you make it more likely the bank says “yes”? Here are my top 2 tips:

#1 – Use a mortgage broker

A mortgage broker is in a better place to explain your exit strategy to the bank. They know what the bank is looking for and can put together financial modelling to help get a “yes” from the bank.

#2 – Use a non-bank lender

Non-bank lenders take a more pragmatic approach than traditional banks.

Loan applications are assessed case by case. There aren’t any hard and fast rules about who they will and won’t lend to, but they do tend to be more expensive.

Case study

John and Betty applied for 2 mortgages in their early 60s. They wanted to buy 2 investment properties.

Both mortgages were for 30 years, starting with a 5-year interest-only period.

John and Betty had diligently paid off their mortgage, but they hadn’t thought to invest in any other assets outside their main home.

It was only when they were in their 60s they discovered the Property Academy Podcast and thought about investing. They feared they had left it too late.

But John and Betty had lots of things in their favour. Their mortgage was paid off, and they had no other debt. They owned a small business and worked behind a desk to ensure it ticked over smoothly. Because they loved their jobs so much, they had no plans to stop working.

The bank said “yes”. It wasn’t too late for John and Betty, even though they were in their early 60s.

At what point is it too late?

To put a figure on it, if you’re 70+ then that’s when it starts getting a bit too late for a bank.

At this stage, you’ve likely already retired. But if you’re in your 60s, and you can still work ... then it’s not really an issue. On top of that, if you have assets or other rental properties ... it’s going to be way easier for you.

Is it a good idea for older Kiwis to take on debt?

People can get more conservative as they get older.

Someone in their 70s doesn’t have as much time to ride out the market as a 30-year-old would.

This can create more risk, particularly if property prices drop. If your exit strategy hinges on selling your property, you might be caught short. But sometimes you don’t have a choice but to invest later in life.

If you have a Wealth Gap and need more assets, then it might be necessary to take on more debt.