Moneyadviceblog » Loans » How Does a Mortgage for Seniors Work?

For people over the age of 60, obtaining a loan is often very difficult due to their low income. In addition, at this stage, health problems that can lead to disability or death are more recurrent. However, seniors also need funds for home improvements and other purposes like everyone else. Fortunately, there are banking institutions that offer specific loans corresponding to their profile, allowing them to finance their project. How does it work? Discover in this article more details on this subject.

Senior Mortgage Loan: What Is It?

The senior mortgage loan or guaranteed mortgage loan is a financing solution offered to people over 60 years old. It is a fixed-rate loan that cannot exceed 25 years. The loan can be used to finance the acquisition of a second home, the realization of work, or their children’s studies. Unlike loan insurance, guaranteed mortgage loan procedures are more straightforward. Death and disability insurance is not required. It is not necessary to undergo medical examinations either.

However, since this is a financial loan, you must take out a pledge to serve as a guarantor if you cannot repay the loan. Whether you are borrowing from a bank or a private lending institution, this is required. In the case of the guaranteed mortgage loan, the lender requires a mortgage and a guarantee through a guarantor. The loan amount requested must not exceed 70% of its value. The mortgaged property must belong to the borrower. The mortgaged property must not be the subject of a donation during the loan. As for the guarantee, it will be used to take charge of the remaining debt if the borrower dies before the end of the loan. It is granted by a guarantor organization.

Is It up to the Lender to Estimate the Value of the Property?

For the property to be used as collateral for a mortgage, it is essential to have an appraisal done to estimate its value. Lending institutions usually have real estate experts to do this. Therefore, you can rely on them or call upon a real estate expert of your choice. At the end of the appraisal, a certificate will be issued to you, which has legal value in court.

What Happens if the Borrower Dies Before the End of the Loan?

It is indeed possible for the borrower to die before the end of the loan repayment for health problems. However, as mentioned above, death and disability insurance is not required on a secured mortgage. Therefore, the guarantor or the borrower’s heirs will be responsible for paying the loan. Moreover, they can also put the mortgaged property up for sale to pay off the remaining capital. However, it is up to the lending institution to take charge of the sale of the mortgaged property.

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How Does It Differ From the Life Mortgage?

The life mortgage and the guaranteed mortgage are both borrowing solutions adapted for people over 60 years old. For both, death and disability insurance is not required. However, if the borrower dies before the end of the repayment period, the heirs or the co-borrower will take over the debt payment. The difference with the first option is that the borrower does not have to pay anything while remaining the property owner. The heirs will not have to pay the outstanding balance either since the loan will be repaid by the capital obtained after the sale of the property.