… and wants a 30 year mortgage. There is zero chance that he will live to the end of the loan term. Can the bank legally turn him down based on age? Would they?
I remember a cousin of mine who once wanted my grandmother to take out a mortgage for him. She was in her late 80s at the time. He claimed that - though he was as surprised as anyone else - the banks couldn’t discriminate against her. I don’t recall what came of it in the end, though.
I’m not sure age need come into it tbh, and IANAB but I’m sure they could find plenty of reasons not to give a 100 year old a long term loan.
What’s his income? I certainly can’t name any centarians (?centurions?) that still earn a salary, can you?
In any case, when the guy inevitably kicks it, the house will be willed to someone, right? That someone then has the responsibility of mortgage payments, or they can just let the bank have the house. Whichever way things go, it is stacked in the banks favour. Remember, the mortgage is secured on the property, that’s the whole concept of a mortgage. You don’t pay, for whatever reason, and the bank is entitled to repossess what is now their asset.
Debts don’t magically vanish when you die, so I don’t know why age would matter. Ill health might make a difference on whether you could afford future payments, I suppose, but I don’t know if a bank would or could discriminate for health reasons.
Age would not be a factor. The loan approval process is automated and the scoring model would not consider age.
The scoring/approval model considers a numbers of factors. Age is not one of them.
My grandma of 83 was just denied buying a tv on installments because of her age (not in the US mind you), appearantly the store’s policy was not to let anyone over 70 buy stuff on installments.
I must have missed the part where the OP asked about buying appliances on an installment plan at a local store.
I thought we were talking about mortgages at a bank.
Actually, the bank is more likely to give out the mortgage (or they were before the American Housing Disaster™).
Look at it like a smaller (and less official) loan for comparison.
100 yr old dude to friend - “Hey dude, I need 100 bucks. Hit me up, will ya?”
Friend - “NP, man, but I need you to lay something against it just in case, and I’ll want some interest payments regardless.”
100 - “Sure, um, how about you hold my car keys and signed title, and if I don’t pay you back $120 in a month, you keep my car.”
Friend - “Awesome.”
So in this scenario, Friend is doing great regardless of whether 100 kicks it or not. If he survives, Friend gets an essentially free $20. If he doesn’t, Friend gets a car.
Same for the banks. Debts are inheritable, and so whoever Gramps leaves his assets (and debts) to in his will (or if there is no will, whoever the State leaves them to) will have to settle with the bank themselves.
Either way, the bank pretty much wins - they get both the interest payments and the original money if the debt is paid off, and they get the security (the house - God help them with that, but it is what they asked for) if the debt is defaulted.
Where they really win is when MOST of the debt is paid off before defaulting, because then they get interest, most of the capital, AND the security off the poor schmuck that took out the loan.
My 88-year old father-in-law just took out a home equity loan. Some years ago my (then) 72-year old father took out a 30-year mortgage to buy a condo.
The mortgage is tied to the property, not the borrower. That’s the difference between a mortgage and (for example) a credit card. Whenever the centenarion shuffles off this mortal coil, the house will still be here.
If the bank thought the house wouldn’t retain enough value to pay off the mortgage, they probably wouldn’t write a loan – but then they might night write a mortgage for a 40-year old, either.
What? Not in the USA. Debts can be claimed against the estate, and take precedence over bequests, but if Grandpa leaves you his $800 bank account, no one can legally try to collect his $10,000 in debts from you.
True Dat! My Mom passed away last June owing Discover $13,000 and Target MC some amount. She had no assets so it was all written off after a few phone calls. And I did collect her life insurance.
The Age Discrimination Act of 1975 prohibits discrimination on the basis of age in programs or activities receiving Federal financial assistance. Assuming a potential lender has some sort of federal assistance with its programs (Fannie May and Freddie Mac, among others), a WAG is that 100 year old applying for a mortgage would have a case.
Of course, a 100 year old applying for a loan would be a cause celeb in their own right, not to mention have acquired a few friends in their 100 years. Any lender willing to say no might find themselves on the short end of a public relations fiasco.
Right-o, but if Gramps tries to leave you the house which was the security on the mortgage, that’s when the debt DOES come in, right?
That’s what I was getting at.
The house wouldn’t pass to any heir it was bequeathed to in Gramps’ will unless the rest of Gramps’ estate - cars, cash, mutual funds, etc. - could be sold off to produce enough funds to pay off the mortgage. No heir would be required to pay off the mortgage (tho the ownership of the house wouldn’t be allowed to transfer to the heir until the mortage gets paid off), and no heir’s credit rating would suffer in the event of foreclosure on Gramps’ house (due to lack of funds in the remainder of Gramps’ estate) by the bank.
OTOH, if Gramps only owed $50K on a $300K house, the heir might be motivated to come up with that $50K payment in order to assure they inherit that $300K house.
That’s what I was going for - I’m sorry if I wasn’t clear before.
I didn’t mean to imply that the bank would come after the heirs for the rest of the money, but instead that the house itself would go to the bank for the mortgage, and if the heirs WANTED the house, they’d have to deal with the bank for it.
Now has scary thoughts of banks and loan-peoples coming after inherited debts to enforce payments on debts made before you were born. Debtors’ Prisons ahoy and all that. Shiver.
The bank could legally demand he take out some mortgage insurance
This is what you said that is causing the confusion…it sounds like it is not what you meant.
To be clear, debts are not inheritable. Upon death, most debts transfer to the estate of the deceased, none to the heirs. If there are not enough assets in the estate to cover the debts, then a probate court decides which lenders get paid how much, and they are SOL for the balance.
There have been some dope threads about unscrupulous lenders (or collection agencies) trying to bully heirs into paying debts legitimately incurred by the deceased, and it is an old scam for fraudsters to try to collect bogus debts from the grieving widow.
You are correct - I meant that the debt stays with the estate, not the person originating the debt, but I was typing distractedly and didn’t use the correct language.
The OP seemed to think that the debt was contingent on the originator staying alive or competent to repay the loan, where the correct idea is that the loan sticks with whatever asset was made to secure it in the first place.
What I was trying to convey was that if Gramps passes and still owes most of the loan to the bank, USUALLY the bank will get the house, and therefore Gramp’s heirs won’t get that part of their inheritance because technically, it isn’t theirs - it’s security for the bank on a loan that wasn’t repaid.
The bank can’t come after them for anything else, but the bank does have the right to the house if it was listed as the basis for the mortgage. Same with a car title loan or a loan based on land, or whatever.
However, I also wanted to point out that if the heirs wanted to ***get ***the house, then I believe they are free to try to pay off the remainder of the loan and then take official possession. I’m not clear on the details of how it happens, but I know it can, because my family did this for my great-uncle’s house (it was a historically significant property - we wanted to keep it.)
Again, apologies for unclear language earlier.
Most of the other responses have made the same basic point, but I think it’s lacking.
Repossessing the house is a last resort for the bank. No bank wants to be in the real estate business.
Think about it. If it was as straightforward as you think, banks wouldn’t bother with checking your income and credit score. After all, they have the house. No, the banks want you to pay the loan. If worst comes to worst, they want the house as collateral. But that’s not what they’re looking for, and they won’t make the loan if that’s all they have to rely on.
A 100 year old person applying for a 30 year loan is worse than a guy with a terrible credit score or an unstable job history. Because he definitely will not make the payments for the term of the loan. (Heirs might pay off the loan. But they might not. The bank doesn’t know anything about the heirs at this time.)
But the thing is MOST people don’t make the payments for the term of the loan. (Back when real estate was normal) you would live in a house for a few years, build a little equity, sell the house, and then your increased income would let you buy a bigger house. Very few people buy a home and live in it for 30 years…
What is most likely to happen in any case, 100 year old or not, is that they will pay a ton of interest up front and then the home will be sold in a few years, in the case of trading up for a younger person, and at the estate sale for the 100 year old.
A bank as a company has a right to refuse service to anyone.