IT IS NEVER TOO LATE TO INVEST IN YOUR FIRST PROPERTY
Even if your golden years are fast approaching, and you still rely on a landlord for the roof over your head, you are not necessarily doomed for retirement. Granted, there may be additional hurdles in securing a home loan at an older age, but it is not an impossible feat. Market figures for 2018 show that the average age of the first-time buyer in South Africa is 34 to 35 years old, says Shaun Rademeyer, CEO of MultiNET Home Loans.
It is never too early or too late to buy a home as this decision depends on one’s individual affordability and life stage needs. Ideally, a bank would want to ensure that a client is not older than 75 when the bond is paid up.
“Theoretically there is still opportunity to lend to customers who are 50+, however it may be harder to be granted a bond after the age of 65.” Rademeyer emphasises that all applications are taken on a case-by-case basis and decisions are based on a risk assessment.
“If a bond is taken at age 65 with the aim to have the debt paid off by the age of 75, the loan term would be reduced significantly, consequently increasing the monthly instalment.” Retirement income would need to be proved to support the lending, and there is a likelihood that this income level would be below the previous salary level, he adds.
It is not uncommon at all for buyers to be purchasing in their later years as it is often then that they are beginning to reap the rewards of years of hard work. Sometimes they even build their dream homes.
With the need to downsize or invest in security, often lock up and go properties within estates are the properties of choice. There is, therefore, no age limit as to when someone can buy their first home, although they would need to comply with the lending process if they are looking for a bond.
Without the need for a bond, though, there is no maximum age for home buyers and there is no stage when anyone has missed the boat. There are also many reasons why people do buy later in life, including moving around for employment, working abroad, saving money, or inheritance.
Uncertainty in the country is also a reason why people may have held back on investing earlier in life. But while there is no correct age to buy, Rademeyer does not recommend they climb on the property ladder later than necessary. “Invest smartly, early on in life and keep climbing the ladder each year. “
Rademeyer closes by saying “Don’t let age be a barrier as it is definitely possible to take out a loan regardless of how old you are.”
Generally speaking, lenders do view mature aged mortgage applicants as higher risk borrower, so they have stricter lending requirements. It’s a good idea to be aware of what these are so that you’re well prepared when it comes to applying for a mortgage.
To begin with, let’s look at reasons why you may want to apply for a home loan later in life as lenders will take this into consideration.
- Renovations or upgrades
You may have lived in your home for several years and decided that it’s time to move on. To do so, you may need to add to your home loan or take out a new one.
- Debt consolidation
Refinancing allows you to consolidate debts such as car loans, credit cards or personal loans, which could save you money.
- Life changes
Has your family situation changed? Perhaps your children have grown up and left the family nest. A change in circumstances is a common reason to take out a new loan.
Regardless of age, lenders always look at your current financial situation to assess your home loan application. Lenders can’t discriminate on age, but if you’re mature aged and close to retirement, they will want to know that you have a plan for how you will support yourself financially.
In addition, they may require you to demonstrate an exit strategy that outlines how you will pay off the loan or prove you can service the loan during retirement.
You can minimise the time you’re in debt by asking for a shorter loan term.
It’s important for you to work out what your income streams will be when you retire and whether that will allow you to pay off a home loan. Some examples of income may include: your retirement funds; revenue from a diversified share portfolio and other assets. Whatever the income is, ensure it is sustainable and consistent in order to prove you can continue to service the loan in your retirement years.
- Reverse mortgages
If you’re looking to borrow money in retirement, a reverse mortgage may allow you to use the existing equity in your home to act as security for a new loan, rather than relying on a regular income stream.
The number of South Africans older than 60 is anticipated to grow over the next two decades from 5- million to 9-million. You should not let your age be a deterrent to applying for a home loan. Your MultiNET Home Loan specialist can take the stress out of the process by exploring your options and finding the right product for your financial situation.