September 5, 2022
How old is too old to buy your first house?
They are not many of them and this, despite everyone wittering about the massive property price growth we've experienced lately, is to say nothing of the more recent cost of living and interest rate spikes.
But older first-home buyers (FHBs) - those 40 years old and above - are still out there, quietly happy with renting and the benefits it can offer.
For long-term, older renters, it's not so much "Why buy?" but rather, "Why not rent?"
Certainly, sticking with renting doesn't mean these people aren't financially savvy.
Many plan to buy but may financially or otherwise be not in the situation to do so.
And too, emergencies and other changes can happen - think pregnancies, losing your job, your folks' needing health help and more.
As a result, buying a house can fade into the background of an already busy life.
And there are plenty of good things about renting too.
Sure, we have to clean when property managers do their regular check but hey, your place probably needed a clean anyway, right?
And when the oven or hot water system collapses, all you need to do is pick up the phone and have it serviced ASAP and at no cost to you!
As well, the house that older FHBs are renting may be in a great location, close to their kids' schools and other amenities - while buying a similar property in this same area could cost a mint.
And so, these FHBs continue to rent until one day, they realise their Big 4-0 (or Big 5-0) Birthday is just around the corner - with their working and earning days officially now mounting to just 15-25 years.
(NB: the retirement age varies from lender to lender).
With the majority of home loans having a 30-year term, suddenly, things don't look so good when it comes to your future house-buying possibilities - and security.
Do you really want to be paying rent - or even the last dregs of a mortgage - at 70 years old and over?
It's this fear that has many 40-and-over renters suddenly realising that time is running out...
Before you panic, let's sidetrack a little and consider the fact that you're not the only older FHB out there.
In fact, 40-50-year-old FHBs could well be the norm in the next few years.
Currently, the average FHB is 36 years old, according to a money.co.uk study released at the end of 2020.
But a study from government-backed South Australian lender, HomeStart Finance in 2017 noted over-40s would make up the majority of Australian first-time buyers by 2027.
Indeed, one article we read described 40-year-old FHBs (or those nearly so) as "spring chickens when it comes to being considered as older borrowers".
Having some of the most expensive house prices in the world isn't helping either with the Annual Demographia International Housing Survey in 2022 noting Sydney was the most expensive city in the world, after Hong Kong.
The report also noted that Melbourne is the fifth most expensive city of the 92 major housing markets in eight nations that it surveyed.
Short answer: no, they can't.
The 2004 Age Discrimination Act officially prevents any lenders or brokers from shutting their financial door in your face if you've an over-40s FHB.
However, as we've said, the fact remains that if you're over 40, you only have 25 years or less before you officially retire and stop earning money.
So, don't expect lenders to love you if you're over 40.
You will be considered a higher-risk borrower and you will have to meet stricter lending requirements including needing a larger than average deposit.
Bear in mind though that 1/ lenders are increasingly tough on even young FHBs with solid incomes and 2/ there are still ways to prove and improve your financial smarts when it comes to buying as an older FHB.
Firstly, you have something 20 and 30-plus-year-olds can never have: life experience!
You're more likely to have built up a strong career, so even if you lost your job tomorrow (heaven forbid!), you should be able to achieve a similar one in the same industry, thanks to your experience.
You've also had plenty more years than those young(er) FHBs to have built up strong savings and/or investments and you know what's it like to pay long-term rent - which will essentially become your mortgage repayments.
So, don't get yourself too down!
Saying this, there are some points you can work on to help your older FHB loan application, such as having the following:
Be prepared to pay off your mortgage even faster and harder than younger FHBs because let's face it: you do have a shorter repayment time than these people.
NB: Your lender may well only write you a loan for a shorter term than that of a younger FHB anyway.
You can always redraw some of those extra repayments if an emergency or similar arises.
Bear in mind too that even refinancing may be more difficult as an older FHB.
Firstly, consider that you will most likely be living in this house until you're around 65 years old and possibly more.
By then, you may have health issues or your family or close relatives may.
Regional and rural areas most often offer cheaper homes than those in the city, but again, if your health or finances deteriorate, living in suburbia may well be wiser.
Simplicity and modernity are also more important as we get older.
So, look at homes with ground floor access and head for places that don't need major renovations and - unless you're a keen gardener - with smaller gardens.
Talking smaller, older FHBs whose kids haven't moved out as yet should consider that this is likely to happen between now and the next 25-30 years.
So, how old is too old to buy your first house? Whatever your age or experience, we at Listing Loop can help you buy - and sell - off-market properties.
So, if in doubt about any of your home-buying plans, sign up at Listing Loop or download our app.
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