Senior loans (or “senior mortgages” or “first mortgage” or “first-lien” debt holders) are in first position (i.e. they have a first-lien priority). Junior loans (or “junior mortgages” or “second-lien” debt holders or mezzanine capital) have a lower priority than a first or prior (senior) lender.
Investors need to understand senior loans are not without their risks. As they are usually issued by below investment grade companies, there is a greater risk of default and thus potentially greater exposure to market volatility and liquidity risk when compared to investment grade debt obligations.
Age doesn't matter. Counterintuitive as it may sound, your loan application for a mortgage to be repaid over 30 years looks the same to lenders whether you are 90 years old or 40.
A reverse mortgage is a type of home loan that allows homeowners ages 62 and older to borrow against part of their home's equity. Unlike a regular mortgage in which the homeowner makes payments to the lender, with a reverse mortgage loan, the lender makes regular payments to the homeowner, hence the name.
A junior mortgage refers to a second mortgage, which is granted after the approval of a first or prior primary mortgage. The primary mortgage is referred to as a senior mortgage. It is important to know that a junior mortgage differs from home equity lines of credit (HELOCs).
A junior mortgage often refers to a second mortgage, but it could also be a third or fourth mortgage (e.g. home equity loans or lines of credit (HELOCs)). In the case of a foreclosure, the senior (first) mortgage will be paid down first.
Summary: maximum age limits for mortgages
Many lenders impose an age cap at 65 - 70, but will allow the mortgage to continue into retirement if affordability is sufficient. Lender choices become more limited, but some will cap at age 75 and a handful up to 80 if eligibility criteria are met.
Since age isn't a factor considered in lending decisions, there are typically no special rates for seniors. The mortgage rate you'll get will depend on regular mortgage factors, including your credit score, loan type and term, the size of your down payment and loan-to-value ratio (LTV).
As Federal Reserve economist Natee Amornsiripanitch noted in a recent brief, older mortgage applicants are “significantly” more likely to be rejected for a loan than similarly situated, but younger, borrowers. At the same time, loan rates increase steadily with age, peaking for new borrowers over the age of 60 and 70.
Yes, seniors on Social Security can get a mortgage. Social Security Income (SSI) for retirement or long-term disability can typically be used to help qualify for a mortgage loan. That means you can likely buy a house or refinance based on Social Security benefits, as long as you're currently receiving them.
The brief's key findings are: An unconventional strategy allows individuals to use early Social Security benefits like a “free loan,” paying back the principal while keeping the interest. If this strategy were widely adopted, it would cost Social Security $6 billion to $11 billion per year today and more in the future.
Oftentimes lenders want to see your total debts at a maximum of 43% of your income, including the home equity loan, so if you have enough Social Security income to meet that requirement, you can still typically qualify.
Buying a home after 60 can make sense if you have sufficient monthly income and find an affordable home. In addition, if you're physically capable of maintaining the home or can pay for extra help, homeownership won't become burdensome.
Some lenders have loan programs geared toward seniors (retired and working), including seniors with problematic credit. Key factors to weigh are the annual percentage rate (APR) that's to be charged against the balance, whether the APR is fixed or variable, and the length of the payoff schedule.
3 With a recovery rate of 80%, and a historical annual default rate of 3%,4 the historical net credit loss of senior secured loans is a meager 0.6% on average.
You may hear that seniors shouldn't worry about old debts. This is partially, but not completely, true. Many seniors are “judgment proof,” which means their income is derived from retirement, Social Security, or other accounts that can't be garnished.
The Home Purchase Process for Seniors
In fact, the Equal Credit Opportunity Act prohibits lenders from discouraging consumers from taking out a mortgage based on age. The most important criteria are the same – income, assets, credit report, credit score – and the paperwork you submit to the lender will reflect that.
The HECM is the FHA's reverse mortgage program that enables you to withdraw a portion of your home's equity to use for home maintenance, repairs, or general living expenses. HECM borrowers may reside in their homes indefinitely as long as property taxes and homeowner's insurance are kept current.
The survey, "Retirement and Mortgages," by national mortgage banker American Financing, found 44 percent of Americans between the ages of 60 and 70 have a mortgage when they retire, and as many as 17 percent of those surveyed say they may never pay it off.
More Than 10 Million People 65 and Older Have a Mortgage — Here's Where They Make up the Largest Share of Homeowners. Jacob Channel is a Senior Economist for LendingTree.
The largest shares of homeowners 65 and older still with a mortgage are in Miami, Los Angeles, and Sacramento, Calif., according to the analysis. On the other hand, three Texas metro areas—Houston, Austin, and Dallas—have the smallest share of homeowners 65-plus with a mortgage.
A lender generally can't deny your loan application or charge you higher interest rates or fees because of your age. This rule applies to various types of lenders when they're deciding whether to give credit, such as an auto loan, credit card, mortgage, student loan, or small business loan.
Absolutely. The Equal Credit Opportunity Act's protections extend to your mortgage term. Mortgage lenders can't deny you a specific loan term on the basis of age.
Yes. There is no age limit to a mortgage application. If you have a substantial down payment and a steady income (which can include pension and Social Security payments), you have a good chance of approval regardless of your age.