When am I too old to be a property investor?

Investing in property can be an excellent way to build wealth, but for older Kiwis, the process comes with unique challenges. If you're thinking about property investment later in life, you might wonder: Is it too late for me to buy an investment property? Or, Am I too old to get a mortgage?

While there’s no hard and fast age limit for property investment, there are certain factors you need to consider. Here's what you need to know about the hurdles and strategies for securing a mortgage as an older investor, the benefits and risks of late investing, and tips on setting a solid exit plan.

How Old Is Too Old to Get a Mortgage?

There’s no definitive age cutoff when it comes to securing a mortgage. However, the process becomes more difficult the older you get—especially if you're applying for a mortgage on your first home. In general, banks tend to become more cautious about lending to those over 50-60 years old, as they assess the ability to repay the loan based on income and retirement plans.

For first-time homebuyers, the bank may worry about your ability to keep up with mortgage payments once you retire, particularly if you’re planning on retiring within the next decade. This concern is less of an issue when you’re buying an investment property, though, since you have more options for managing financial difficulties—such as selling the property if needed.

However, once you reach 70 or older, it can be much more challenging to secure a mortgage. While it’s not impossible, it’s a much tougher hurdle to clear.

What Are the Advantages of Property Investment Later in Life?

There are several reasons why property investment might still be a good option for older Kiwis:

1. Building Wealth Late in Life: Investing in property later in life allows you to increase your net worth even if you didn’t start young. With careful planning, you could see solid returns in the years ahead.

2. Control Over Investment: Real estate offers you more control compared to other investment options. You can manage the property, improve it, or even sell it for a profit down the line.

That said, there are some additional hurdles that come with property investment as you age. You’ll need to demonstrate to the bank that you have a clear strategy for paying off your mortgage. Typically, this involves showing that you have a plan to sell the property and settle the debt before you stop earning an income.

Key Challenges for Older Property Investors

As an older borrower, banks assess your ability to repay the mortgage based not just on your income but also on your overall financial situation. Here’s a closer look at the challenges:

1.     Income Stability

For someone over 60, banks will closely examine your current and future income. If you’re nearing retirement, there’s less certainty about your financial situation. If your primary income source is a salary, and you’re still working full-time, you may be okay. However, if you're nearing retirement and plan to rely on superannuation or savings, your borrowing capacity may be reduced.

2.     Existing Debt

If you already have a significant mortgage or other debts, getting approved for a new mortgage becomes much harder. Banks prefer clients with low or no existing debt, as it reduces the risk on their part.

3.     Shorter Investment Horizon

As an older investor, you have less time in the market to ride out any downturns. This shorter horizon can create risks—especially if property prices drop unexpectedly. You might need to sell earlier than planned, potentially at a loss. This is why having a solid exit strategy becomes even more crucial.

How to Improve Your Chances of Securing a Mortgage as an Older Investor

If you’re an older Kiwi looking to secure a mortgage, there are a few key steps you can take to increase your chances of success:

1.     Demonstrate Financial Stability

Banks want to see that you’re financially secure. This means showing that you have minimal debt, a reliable income (or substantial assets), and a clear plan for repayment.

2.     Have a Solid Exit Strategy

The bank will want to know how you plan to pay off your mortgage. For younger buyers, this is usually straightforward—work and earn an income until the loan is paid off. But for those in their 60s or 70s, you’ll need a more detailed plan. For instance, you might plan to sell another property you own, sell off your business or liquidate investments like shares or bonds to cover the mortgage. Having a clear and realistic exit strategy can make all the difference in getting approved.

3.     Leverage Other Assets

Banks are more likely to approve loans for those who have other assets, such as additional properties, shares, or savings. These assets help reduce the risk for the lender. For instance, if you have several investment properties, the bank may see you as a lower-risk borrower.

Should You Consider Non-Bank Lenders?

If you’re struggling to secure a mortgage through a traditional bank, a non-bank lender might be an option. While non-bank lenders typically have higher interest rates, they tend to take a more flexible, case-by-case approach to lending. This could be a viable option if you’re finding it difficult to meet the stringent requirements of banks.

At What Age Does It Become Too Late?

If you’re in your 70s or beyond, it becomes much harder to secure a mortgage for property investment. Banks are typically reluctant to lend to retirees, especially if they’ve already stopped working. However, if you have substantial assets or a reliable income source, it’s still possible to get approved. In your 60s, though, you still have time to make property investment work—especially if you’re still working and have a solid financial foundation.

Is It Wise for Older Kiwis to Take on More Debt?

As we age, we naturally become more risk-averse. While younger investors have more time to ride out market fluctuations, older investors have less room for error. This makes property investment riskier if you’re close to retirement or have limited time to recover from a potential loss. However, if you find yourself needing to close a wealth gap or secure more assets for retirement, taking on debt later in life might be necessary. Just be sure you have a clear exit strategy in place.

Conclusion

There’s no definitive age at which property investment becomes off-limits, but the older you are, the more you’ll need to plan carefully. Banks will scrutinise your financial stability, the amount of debt you have, and your ability to repay the mortgage. But with the right preparation, solid assets, and a clear exit plan, older Kiwis can still succeed as property investors.

Ultimately, the decision to invest in property later in life should come down to your individual financial situation, risk tolerance, and long-term goals. If you’re unsure, speaking with a financial adviser or mortgage broker can help you determine the best course of action.