Financing a property again when you are over 50? Why not. Because age only plays a subordinate role. However, it cannot be completely ignored. Two experts explain what to look out for.
When the children are out of the house, many people find their own home too big. Then they might want a smaller, age-appropriate home. Or they want to move from the country to a city apartment because the infrastructure is better there. Older builders have good prospects of getting financing - provided the framework conditions are right.
"Financing for the 50+ generation is actually no different from that for young builders," says Udo Zimmermann, a specialist in construction financing at finance broker Dr. Small. The financial institutions checked the financial situation of the applicant according to certain criteria such as income, equity and collateral. "If, according to your assessment, he is able to pay the monthly installment, he will usually get the loan," says Zimmermann.
According to the mortgage broker Interhyp, the following factors are decisive for a solid purchase decision in every phase of life: the realistic analysis of the financial possibilities, a look at the personal life situation and the cool consideration of whether the property actually offers what is sought in terms of location, condition and layout .
Age only plays a minor role. "However, it cannot be completely neglected," says Roland Stecher, financial adviser at the consumer center in Bremen. According to the EU residential real estate credit directive, banks ensure that the loans are repaid within the statistical life expectancy. They often start this at the age of 75. "But there are certainly cases where they grant loans with terms of 15 to 20 years, even if the borrower is then over 80," says Stecher.
Udo Zimmermann also observes that banks do not always assume that the customer will repay his loan in full during his lifetime. "With a real estate loan, you always have the property as security that you can use in an emergency. It's different from a consumer loan."
This makes it clear that the so-called best agers, i.e. people aged 50 and over, are definitely an attractive target group for banks. "No wonder," says Roland Stecher. "They often have a lot of equity from savings or life insurance. Or they sell their old property." The following applies: the higher the customer's creditworthiness, the better conditions they get.
If you want to tackle real estate financing at an advanced age, it is best to start with your house bank. "There he can find out what the conditions are and what the bank expects of him," explains Udo Zimmermann. "In general, financial institutions finance up to 85 percent of the value of the property. The customer would therefore have to bring 15 percent plus additional costs as equity." It's good when customers are liquid.
It becomes more complicated when the previously used property is to be used to finance the new place to live. If it's already sold, no problem. But people often still live in it and try to get interim financing from the bank until the new home is completed.
"But that usually goes wrong because low-interest construction financing with very short terms simply doesn't pay off for the banks," says Udo Zimmermann. His tip: Sell the property and agree on a right of residence with the buyer until you move. The sales proceeds can then flow into the financing.
Interested parties should never be satisfied with the first offer from their house bank, but rather inquire at several financial institutions. There are big differences in the offers, a comparison can save a lot of money. Brokers for real estate loans promise a good overview of the market because they work with many banks - including those that are particularly geared towards the older target group.
Above all, customers with a solid income and equity have a good negotiating position with banks. They should take advantage of this and agree on tailor-made conditions.
"In most cases, it makes sense to pay off the majority of the loan by the time you retire," says consumer advocate Roland Stecher. "You can also agree on variable financing and special repayments and pay higher rates at the beginning and lower rates later in retirement." A generally higher repayment rate is appropriate if the property is to be paid off relatively quickly.
Stecher advises agreeing on a fixed interest rate period of at least 15 years, especially now that interest rates are tending to rise again. It can also make sense for older builders to agree on low repayment rates and pay off for longer. Then they have more liquid capital to live on.
"If it is foreseeable that the children will have to step in at some point, it is advisable to take the family on board," says Udo Zimmermann. "A good plan of what should happen to the property in the future can never hurt."
(This article was first published on Friday, May 06, 2022.)