Updated July 16th, 2019
Buying a house has been a traditional part of the American Dream that makes it very attractive to retirees or those nearing retirement. But whether it is a good investment move will depend on your motivations and your financial portfolio.
It’s important to get clear on the real reason you’re considering buying a house at this age so that when you look at your financial portfolio, you can determine whether an investment of this magnitude makes sense for you.
If you have all of your financial ducks in a row and an expert buyer’s agent at your side, there’s nothing stopping you from finding the house of your dreams at any age.
Is 65-years-old too old to buy a house?
No age is too old to buy a house if you have the assets to do so and support yourself for the rest of your life. Buying a home is a long-term investment. Though it may be a hard pill to swallow, at 65-years old, you may not have much time to play the long game.
If you’re going back and forth on whether to buy a house at 65, you need to be practical and understand your motivations, so you can weigh them rationally against how incurring mortgage debt at this age might affect your future.
Buying a house creates a situation where you are gambling with both time and the market. If you’re retired or close to retiring, you may have limited resources that must support you for an unknown period.
When you throw a considerable portion of those assets at a house, you add another unknown variable — the housing market. If the house you purchase does not appreciate, or you can’t keep up with the mortgage payments, you could put yourself in a very difficult position. It’s difficult to think about, but you have to if you want to protect yourself.
Therefore, you need to put extra effort into researching the housing market with an excellent buyer agent. Make sure the odds are in your favor that the property you purchase has the best chance of increasing in value even if the housing market takes a turn for the worst. You’ll also want to look at your financial portfolio with an advisor to best predict what financing might do to your ability to support yourself over the life of any mortgage product you consider.
Is it better to buy or rent in retirement?
Whether you buy or rent in retirement is up to you. But the decision should never be made without taking a cold hard practical look at your financial portfolio. While doing so, keep in mind the following pros and cons of buying vs renting in retirement.
Buying in retirement
Buying a house in retirement depends on your assets and your income. If you have to finance a house, understand that adding a mortgage amplifies your financial risk. Even those with high net worth can lose big by borrowing too much if the house they’re in doesn’t increase in value.
The biggest potential financial perk of buying a home in retirement is that your monthly payments can earn you equity that will pay off if the property increases in value. In addition, having a fixed monthly mortgage payment protects you from future rent increases as the cost-of-living increases. If you own your home, you will also have more flexibility to customize your living environment. You are free to make changes or upgrades, add a garden or own pets.
Buying a home adds more responsibility beyond a mortgage payment. You’ll need to budget for property taxes, homeowners insurance, and homeowners association fees if it applies. Homeowners are also on the hook for maintenance and repairs to the property to protect its value. You need to consider if this is something you can handle as you get into your 70s and 80s.
Owning a home can also limit your mobility. If you find you no longer want to live in your neighborhood or city, or you end up with a medical condition that requires you to move for treatment, you’ll have the hassle of selling at an age where transactions of that magnitude may be overwhelming.
Renting in Retirement
If you haven’t purchased a home before, you may be already weighing the pros and cons of whether to continue to rent in retirement. Here are more to consider that may have been off your radar.
One of the biggest perks we get renting as we get older is flexibility. You have the freedom to move with minimal hassle. For many seniors in retirement, this allows them the ability to explore other areas that they couldn’t when they were working. This freedom makes it easier to move if the neighborhood you’re living in changes, you want to move closer to your family, or you end up with a major health issue that requires treatment in another city.
In addition, renting relieves you of the added expense of property taxes, homeowners insurance, homeowners association fees, and home maintenance and repair costs that come with homeownership.
We don’t know how long we will live and what will happen to the cost of living in the future. Even with rent control (if you are lucky enough to qualify), the expected continual increases in rent can be devastating over time on a fixed income. When renting, you are at the whim of apartment owners who can sell their properties or raise their rents at will.
Finally, you don’t have the flexibility to change your place of residence without the permission of the owner. For the elderly, this can be frustrating if changes to the residence need to be made to accommodate restricted mobility in the later years.
Financing a Home in Retirement
While there is no maximum age for applying for a mortgage, you may find it is tougher to qualify for certain mortgage products. This is not necessarily age discrimination, which is illegal under the Equal Credit Opportunity Act, but just hard numbers. When lenders underwrite a loan, they have to ascertain their risk. Therefore, the proof of income you have to submit when you are retired will be evaluated differently.
Lenders need to confirm that you not only have the assets but also have access to those assets to pay them back. For those in retirement, lenders consider 401(k)s, IRAs, and other retirement account distributions. But these assets must be accessible to the borrower and not currently being used as a source of income. This can make things difficult, especially for borrowers whose assets are in retirement vehicles that may be subject to withdrawal penalties.
If you’re a veteran, be sure to check if you qualify for a VA loan. Another avenue to check if you are having a tough time qualifying with conventional lenders are FHA loans. Before applying for financing, make sure your credit is exceptional and that your debt-to-income ratio is low. You’ll have an advantage if you consult a financial advisor and an experienced buyer agent who knows the lending procedures in your local market before you apply for financing when you are retired.
Finally, make sure you understand the new tax laws for 2019. While you can still write off a mortgage that was refinanced, you can no longer deduct for a home equity line of credit (HELOC). This can hit retirees on a limited income hard who were perhaps depending on cashing in on the equity of their home as a backup plan for living or healthcare expenses.
Before You Buy…
If you’ve already ascertained that you’re in a financial position to incur the added risk of a mortgage, your next step is to contract the services of an expert buyer agent familiar with the lenders in your local area and know what their qualification procedures are for retirees or those nearing retirement. This will give you the best chance of getting a better mortgage product with the mortgage terms you want.
You will also want to make sure that the properties you are looking at have the highest potential for appreciation and are in excellent condition to weather the years to come. Chances are that this is the home you will spend the rest of your life in. It’s imperative that you have an expert realtor in your corner who has years of experience in their local market.
Clever Partner Agents are full-service realtors are strictly vetted to make sure they are the best in their local market. When you use the expert services of a Partner Agent, you may even qualify for a buyer rebate to put money back into your pocket, or use to furnish your new home. Find a Clever Partner Agent in your desired location today and get started on the search for your perfect retirement paradise.
FAQs About Buying a House at 65
What is the average age to buy a house?
According to the National Association of Realtors (NAR), the median age of home buyers is 32. However, the NAR also recently released a report stating that 76% of older millennials (born between 1980-1989) have had to delay plans of homeownership due to increasing student loan debt. As student loan debt becomes more of a barrier to life plans, the average age to buy a house may also increase.
What age should you buy a retirement home?
The earlier you purchase a home for your retirement, the more you can take advantage of home equity. This is especially true if you need to take out a mortgage to finance your purchase. Retirement can be a long way off for some. Whether you are a current homeowner looking at buying a second home, or you’re renting and thinking about investing in a home for your later years, the assistance of a local real estate professional in the market you are interested in can help you find a well-built home in a desirable market that will still increase in value by the time you retire.
Can a 65-year-old get a 30-year mortgage?
Yes. To base approval on age is discriminatory under Federal law in the United States. If you are applying for a mortgage at 65, chances are that you are both still working and have retirement vehicles which are allowed to be considered in your debt-to-income ratio. This can give 65-year-olds some leverage when applying for a mortgage. Make sure you have documentable and stable income and assets and satisfy the credit requirements for the loan program you are applying for.
Can a 70- year-old get a 30-year mortgage?
Yes. Legally banks are only allowed to offer loans based upon financial qualifications. However, qualifying for a mortgage in retirement can differ from during working years. While working, banks can look at how much your salary might increase in the future. If you are on a fixed income such as social security, with cost-of-living increases, it may not make sense to get a 30-year mortgage. It’s wise to sit down with a financial advisor and a good buyer agent to consider your best approach to financing a house.
Can an 80-year-old get a 30-year mortgage?
With excellent credit, a low debt-to-income ratio, and a strong financial portfolio, people of any age can get a mortgage. Because seniors can use their retirement assets for the loan they want, this gives them an added opportunity to qualify. But at 80-years-old, you need to ask yourself whether to get a 30-year mortgage. Make sure that taking out a mortgage will not put you in a difficult financial position over the long term by consulting your financial advisor and an experienced real estate agent.
No matter what age you are, depending on your finances and your life goals, buying your dream home is always an option. But for older home buyers, the assistance of an expert buyer agent is more critical than ever to make sure the property you purchase both increases in value and is in excellent condition.