If you are in your 50s, 60s, or even 70s, and still renting because you cannot afford to buy a property, it does not mean that homeownership hope is lost.
Yes, it can feel disheartening watching younger people become homeowners while you continue to pay off someone else’s bond, but your time could still come.
Granted, there may be additional hurdles when securing a home loan at an older age, depending on your income stream, but it is not impossible.
Jackie Smith, head of Buyers Trust, a subsidiary of ooba Group, says many homeowners are being cautious and making their first home purchases later in life. Ten years ago, most first-time buyers were in their late 20s, with the average age being 29, but now, the majority of first-time buyers are aged between 30 and 40.
“Waiting until later – when you are financially stable - gives you the time that you need to save up for a sizeable deposit. In turn, this brings with it a host of benefits, such as reducing your monthly repayments.”
The average age bracket of the first-time buyer in South Africa is 35- to 40-years-old, but Nondumiso Ncapai, managing executive at Absa Home Loans says it is “never too early or too late” to buy a home. This decision depends on what an individual can afford and their life-stage needs.
Ideally, however, a bank would want to ensure a buyer would not be older than 75 when the bond is paid up.
“Although there is still opportunity to lend to customers who are over 50, it may be harder to be granted a bond after the age of 65,” she says, emphasising, though, that 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 expunged 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 this income level would be below the previous salary level.
BetterBond national partner manager Stephen Whitcombe says “it is not uncommon” to receive applications from buyers of all ages, including those above the age of 50.
“Banks usually prefer the age for full repayment of a home loan not to exceed 70. So, a 60-year-old buyer, whether a first-time or repeat buyer, would probably only qualify for a 10-year term, making the age at final repayment of the home loan, 70.”
Reducing the term increases a client’s minimum monthly repayments and influences their home loan affordability.
“The older a home loan applicant is, the more we would encourage them to provide a deposit as this reduces the risk for banks when considering whether to approve that home loan. We have had applicants apply successfully for home loans in later life, but they were able to put down a deposit of 50% or more, and prove a stable income.”
At FNB, a ‘fraction’ of the deals registered in the past year were from buyers above the age of 50, says Angela Glover, head of product at FNB Home and Structured Lending Solutions. While the oldest first-time buyers vary from bank to bank, they usually range from 55 to 66 years.
“We consider income as well as expenses when granting a loan, and as such will look at the customer’s revenue streams to ensure they can afford the repayment. This does not necessarily mean it gets harder to have a home loan granted at an older age.”
Glover says the bank grants home loans to customers of any age, subject to affordability, with the condition that the loan has to be paid up by the age of 75.
“We can offer a loan with a shorter term than the normal 20 years, but monthly home loan repayments might be higher in comparison to someone that has a 20-year or 30-year repayment term. Putting forward a deposit will assist in reducing monthly repayments and strengthen affordability.”
Regardless of your age, if you are wondering whether you are ready to buy a home, Smith says these are the five signs that say you may be:
1. You have checked affordability
To do this: Use free online tools such as bond, repayment, and transfer costs calculators to see if you can afford the upfront costs of purchasing a home. Additionally, assess whether your income can comfortably cover monthly repayments and other homeownership expenses without straining your budget.
2. You have considered long-term plans
To do this: Think long and hard about your future plans, such as where you will settle and for how long, and how these align with homeownership.
3. You’ve assessed market conditions
To do this: Study sales data for your desired area to understand the average sales price for homes there, as well as how long they’ve spent on the market.
4. You’ve put aside money for a deposit
A minimum 10% deposit is recommended but many first-time homebuyers are now putting down bigger deposits to show their commitment to both the seller and the banks.
5. You’re ready for the additional responsibilities
To do this: Reflect on your lifestyle and personal preferences because buying a home means taking on additional responsibilities like maintenance, repairs, and property management.