What is the cut-off age for securing a home loan? Experts weigh-in
Interest rates have dropped and may drop again in November, and the South African property market is booming, especially in the Western Cape, so, could this be the time to buy, and if so, will your age be a factor?
Homeownership can be significantly impacted by age, as it affects your ability to secure a home loan, according to Adrian Goslett, the Chief Executive Officer (CEO) of RE/MAX of Southern Africa.
Goslett states that lenders often use retirement age as a guideline, meaning the closer you are to retirement, the shorter the loan period offered.
The real estate expert noted that 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,” Goslett explained.
He said that 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, 10 years instead of 20 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 said.
You are not excluded if you are older
Goslett said that if you belong to an older age group, do not feel despondent, this doesn't mean older buyers are excluded from securing a home loan.
Banks could offer tailored solutions for older buyers. This may include a load agreement that has shorter loan terms or may require a higher deposit. This will help mitigate the increased risk.
Goslett also added that older applicants with strong financial positions, such as substantial savings, and significant deposits can improve their chances of securing a bond with South African banks.
Speed is key!
The best thing you can do is getting on the property market as soon a possible.
“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,” Goslett emphasised.
“As property values increase, homeowners can leverage that growth to upgrade or diversify their property portfolio, putting them in a stronger financial position,” he added.
Where to buy?
For South Africans looking to purchase their first home, the Western Cape provides an opportunity for those a bit older and those wanting a return on investment.
Recent data shows that property sales in small towns in the Western Cape are booming as more and more people are looking to move to smaller coastal areas.
According to the Seeff Property Group, West Coast towns and villages are no longer just for holidays and retirement.
The areas of Langebaan, Yzerfontein, St Helena Bay and Elands Bay have seen a strong shift in sales activities during the market boom of 2021/2022.
Seeff noted that the migration of wealth to the West Coast is seeing prices of up to R8 million being paid for luxury homes in Langebaan.
According to Lightstone data, the Langebaan property market has seen transactions of over R1.3 billion from September 2023 to September 2024.
This research also revealed that West Coast property markets experienced a significant boom during 2021/2022, leading to substantial growth in median prices over the past five years.
In areas like Yzerfontein and Paternoster, prices have doubled, while locations such as Langebaan, Malmesbury, and St Helena saw a marked increase. The data found that most towns experienced growth between 60% to as high as 196% over the last 10 years.
Price growth over 5 and 10 years
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