The criteria for home loans for older buyers are different, so make sure to know what the banks want from you. By Bonny Fourie
It is never too late to buy your first property. Even if your golden years are on the horizon and you still rely on a landlord for the roof over your head, you are not necessarily doomed during retirement.
Granted, there can be additional hurdles when securing a home loan at an older age, but it is not impossible. Market figures for last year show the average age of the first-time buyer in South Africa is 34 to 35 years, says Nondumiso Ncapai, head of product at Absa Home Loans. That said, it is “never too early or too late” to buy a home as this decision depends on what an individual can afford and their life-stage needs.
Ideally, however, a bank would want to ensure a client was not 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.” Ncapai emphasises 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, she says. The average age of BetterBond’s firsttime buyers is 35, although “it is not uncommon” to receive applications from buyers of all ages, including those above the age of 50, says regional manager Stephen Whitcombe.
“Banks will usually want the age for full repayment of the bond not to exceed 60 to 70 years, 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 70 upon the final repayment of the home loan being made.”
Reducing the term increases a customer’s minimum monthly repayment and affects affordability, Whitcombe says. “The older an applicant is, the more it is recommended that a deposit is provided, as this reduces the risk for banks when approving a home loan. We have seen applicants aged 65 to 70 apply and be successful in obtaining a home loan, but in such cases, there was usually a deposit of 50% or more and stable income/affordability were highly evident. The loan terms were also shortened considerably.”
At FNB, a “fraction” of the deals registered in the past year were from buyers above the age of 50, says Mpho Ramatong, home finance division channel head. While the oldest first-time buyers varied from bank to bank, they usually range from 55 to 66 years. The standard “cut-off” time for application is five years before retirement.
“It is a requirement that by the time the buyer goes on retirement, the home loan needs to be settled.” This does not necessarily mean it gets harder to have a home loan granted at an older age, Ramatong says. She 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 repayment term. “Putting forward a deposit will assist in reducing monthly repayments and strengthen affordability.”
First buys are coming later in life
First-time buyers are stepping onto the property ladder much later in life, with the average age around 36 to 38 years. Two decades ago, the average age was 24, says Dawn Bloch, Lew Geffen Sotheby’s International Realty’s area specialist in Kirstenhof and Zwaanswyk.
More stringent bond qualification criteria and the fact that property has become more expensive are two of the many reasons for this. More are spending money on higher education, and technological devices to support this education, or their social lives. In previous years, families only needed one car.
Now it is essential both parents own a car. In addition, many young people own cars to get to university or work, Bloch says. Another reason why many buy their first homes at a later life stage is because they are generally starting families later. Millennials marry and have children later and will often rent until they buy.
Poor retirement planning and economic conditions mean more people are continuing to work until later in life than before, she says. The Seeff Property Group’s average first-time buyer is about 35 years old, but chairman Samuel Seeff says this also depends on the area in which they are buying.
Areas where entry price points are lower “tend to have a higher proportion of younger buyers”. “Generally, the age of first-time buyers is higher now compared to what it was before the introduction of the National Credit Act in 2008. The act has made it more onerous and expensive for buyers to get onto the property ladder.”
The average age of buyers is also stretching as the costs of buying and barriers to home ownership increase, primarily as a result of pressure on affordability and the high costs of buying property, including transfer duty and transaction costs, Seeff says.
The average age of Chas Everitt International property group’s first-time buyer is 31, with the oldest recent buyer 72, says chief executive Berry Everitt. It is “not common” for buyers to be aged above 60, unless they are buying for investment, retirement or for children or grandchildren. If one puts a “deadline” age on buying, Everitt says it would be about 45 years.
This is because the usual bond term is 20 years and banks prefer that period to end at around the age of 65. “However, it much depends on individual circumstances. Employees who plan to retire in the traditional fashion could be limited while high-networth individuals, who often buy with cash, don’t really have any age restrictions.”
For those in “normal” employment, he suggests they buy by the ages of 45 to 50. “After that the term of the bond may be shortened and minimum repayments become higher.”
The 55-plus have different needs
The age and stage of life at which a person decides to buy a home will dictate the type of home they choose. While a buyer aged about 35 may look to buy with a future family in mind and, therefore, want a home that can be expanded and is close to good schools and parks, for example, Seeff’s Samuel Seeff says a buyer aged 55-plus would have “considerably different” lifestyle needs.
“You may want a property which offers less maintenance and more convenience and security. You also may not want to live near busy and noisy school nodes and may, for example, want something close to the sea where you can enjoy lovely walks. Perhaps you are keen to indulge more in your passion for golf and want to stay in a golf estate.”
Older buyers, he says, tend to look to look for convenient lock-upand-go properties. Apartments in areas like the Atlantic Seaboard may be popular, but a property at the Erinvale Golf Course would also be in demand.
Seeff says popular areas for older buyers include:
Atlantic Seaboard: Sectional title properties are popular and areas to look in would include Bantry Bay, Sea Point and Mouille Point. “The location and views, as well as sought-after address, that the area offers are some of the reasons why older buyers are attracted to the area, but also for the excellent facilities.”
Waterfront and Silo District: Both areas offer an “excellent” choice of lock-up-and-go apartments and “fabulous amenities” on your doorstep.
City Bowl: Lightstone data shows 40% to 60% of buyers in this are area older than 35. Popular areas for sectional title property include Oranjezicht, De Waterkant, Gardens, Tamboerskloof and Vredehoek.
“The suburbs are highly sought-after, with a broad mix of older buyers, not just local but also foreign buyers who will often retire here or spend long periods of time in the country. The area offers excellent facilities for older buyers with easy walkability to restaurants and other entertainment including theatres. There is also excellent healthcare nearby should that be required.”
CBD: For similar reasons to the City Bowl, this area is popular with older buyers, and 45% of buyers here are older than 35.
Life rights: Popular concept
The average age of retirement home buyers in South Africa is 74, says Prieshka Taylor, marketing manager for Evergreen Lifestyle.
The group’s oldest first-time buyers in recent times include:
◆An 89-year-old who bought a house in Evergreen Noordhoek.
◆An 89-year-old who bought an apartment in Evergreen Muizenberg.
The youngest buyer was a 55-year-old who purchased a house in Val de Vie Evergreen, and moved in immediately. The Evergreen group sells retirement properties on the Life Rights basis, which is growing in popularity.
There are misconceptions that once the Life Rights are paid for, there are no additional monthly fees, Taylor says. “Every village has its own levy structure and one would typically pay the levy standard. Primary healthcare and checkups are offered at the clinic. Anything further would be for the resident to cover separately. However, all residents are offered discounted medical rates.”
Food at the bistro is also paid for separately.
Age no factor: Buy now if you can
There is never a better time to invest in property than the present, says Seeff’s Samuel Seeff. “Securing the roof over your head means you provide security for yourself and your family, whether you are young or old. The older you are, the more important this security becomes.”
When one is older, there can be implications with regards to the repayment term when reliant on home finance. But there is “no age limit” on buying your first home.
“The message to buyers is that if you are financially able to do so, now is an excellent time to buy.” Although older buyers are not often firsttime buyers, Seeff says this does happen.
Some have been working offshore and return to settle, while others can buy after receiving a pension/provident fund payout or an inheritance payout. Some people needed more time to save.
Subsidised buying: For all age groups
Buyers of all ages can access Flisp, a government-led housing subsidy programme available through banks and lenders, says Absa’s Nondumiso Ncapai.
This programme is aimed at customers who:
- Are first-time home buyers.
- Earn a single or joint gross monthly household income of between R3501 to R22000.
- Are South African citizens with valid IDs or permanent residents with valid permits.
- Are older than 18 years and competent to legally contract.
- Have financial dependents.
- Have never benefited from any government housing subsidy scheme before.
“If you qualify, the government may grant you a housing subsidy of between R27960 and R121626. This subsidy is a once-off lump sum payment towards the purchase of your home.”