While renting may make sense when you’re younger and needing flexibility, owning a tangible asset that provides financial stability is always a wise long-term investment.
For buyers aged 50 years and older, property ownership gives you equity close to retirement age. It also provides security as you are no longer at the mercy of a landlord who can terminate your rental agreement, resulting in you having to find a new place to rent in your golden years.
Whereas a decade ago most people were buying their first home in their twenties, statistics from BetterBond show that the average age of first-time buyers applying for loans is 37, with many waiting even longer until they have the financial resources to invest in property.
“BetterBond data (for the 12 months ending March 2024) shows that the average purchase price of a home for buyers between the ages of 51 and 60 is R1.848m, while for buyers over 60 this increases to upwards of R2.1m,” says Bendall. This compared with the average purchase price of R1.1m for buyers in their twenties.
There are some considerations when applying for a loan later in life, however, says Bendall. Banks usually prefer the age for full repayment of a home loan not to exceed 70.
This means that a buyer aged 60 would only qualify for a 10-year loan. A shorter loan repayment period means that the monthly bond payments will therefore be higher than if the buyer had 20 or 30 years to pay off the bond.
As with any bond, affordability is a factor when applying for your bond in your 60s and 70s. Deposit and retirement income would be among the criteria considered by banks when reviewing the loan application.
“Having a deposit of more than 10% will certainly count in your favour and help reduce the monthly bond payments. It is often easier for mature buyers to save towards a substantial deposit, or to have multiple income streams that makes it possible for them to put more towards their bond.”
As with all buyers, irrespective of age, it’s advisable to apply for bond pre-approval to gauge how much you can afford.
“Buying a home is well within reach if you have a clear idea of what you can afford before you start looking at properties.” The pre-approval certificate includes the purchase price you can afford (but remember to buy slightly below this to allow for future interest-rate increases), as well as your possible bond repayments based on various interest-rate and deposit calculations.
"Renters looking to buy may have to adjust their expectations if the purchase price of homes in their current rental area falls outside of their budget. It’s advisable to work with a bond originator who will apply to multiple banks (including your own bank) to negotiate the best interest rate on your behalf,” says Bendall.
Home ownership offers pros and cons for mature buyers. On the one hand, a home requires regular maintenance and upkeep which can be expensive and challenging. However, owners are able to make changes to their home as needed without getting permission from a landlord. This means that if modifications – such as a ramp to allow for wheelchair access – are needed, these can be done fairly easily.
“There’s no need for a mature buyer to give up on the dream of owning their own home. With expert guidance from a bond originator, it is possible to make the best financial decision to ensure that your home becomes an asset that will provide financial security and peace of mind at a time when you need it most,” concludes Bendall.
