As much as we do not like to contemplate the fact that we are indeed getting older, there are times when our age might have a greater impact on our future than we may realise. Homeownership, for example, can be significantly impacted by age, as it affects our ability to secure a home loan.
Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa states that lenders often use retirement age as a guideline, meaning the closer you are to retirement, the shorter the loan period offered. This is because banks factor in a possible reduction in income post-retirement. An ideal scenario for most banks is to ensure that the loan is fully repaid by the time the borrower turns 75, meaning that your last chance to secure a twenty-year loan is probably around the age of 55.
“Younger buyers typically have the advantage of longer repayment terms, which makes their monthly repayment amounts slightly more manageable. In contrast, older buyers, especially those nearing retirement, may face shorter loan terms – for example, ten years instead of twenty years – due to the reduced earning window. This will push up the monthly repayments and can end up affecting how much they can qualify for in home finance,” Goslett cautions.
However, this doesn’t mean older buyers are excluded from securing a home loan. Lenders may offer tailored solutions, such as shorter loan terms or requiring a higher deposit, to mitigate the increased risk. Older applicants with strong financial positions, substantial savings, and significant deposits can improve their loan approval chances.
“As tough as it is, I would like to strongly encourage those who are in their twenties and early thirties is to practice strong financial discipline and savings habits from as early as possible. Even if homeownership is the furthest thing from your mind right now, what you choose to do with your earnings now can have a massive impact on your future ability to afford a home,” says Goslett.
He also explains that the sooner you can get into the property market, the better. “Entering the property market as early as possible allows buyers to take advantage of house price appreciation over time. By starting sooner, you can build equity and climb the property ladder with less reliance on home financing in the future. As property values increase, homeowners can leverage that growth to upgrade or diversify their property portfolio, putting them in a stronger financial position,” he explains.
To help consumers make informed decisions regarding their future, Goslett suggests consulting with a financial advisor or bond originator, like BetterBond, to gain a clearer understanding of their financial situation and what they can qualify for in home finance.
“Once you have a solid plan in place, reach out to your local RE/MAX office to explore the best property options within your price range. Our agents are equipped to help you find a home that aligns with both your budget and long-term goals,” he concludes.
For more real estate advice or to get in touch with your nearest RE/MAX Office, visit www.remax.co.za.
