Bridging the (age) gap
You would think that upon reaching your golden years you are of an age to qualify to do pretty much anything – you’ve worked hard, earned your dues and own your own home. However, when it comes to buying property, for 60-somethings things do get a little harder as they find themselves faced with bank mandates, age restrictions and all sorts of conditions, and the inevitable hard-to-read fine print.
Unless you have cash in the bank (or under your mattress) you would be advised to look beyond the bank – many don’t work in this space and are also reluctant to grant new 20-year mortgages to senior citizens, this despite the fact that the National Credit Act stipulates that one cannot be discriminated against when applying for finance on grounds of race, religion, sex and age. The banks may consider helping out under certain conditions and will do so at their discretion but will also be very stringent in assessing your risk and affordability – there are some instances where they may consider a loan if your pension is deposited there but typically this is an arduous route to follow.
It’s rather surprising that financial institutions are not looking at this mature market which is fast becoming a key driver of growth in the property sector. A recent report from FNB’s Estate Agent Survey stated that the group of sellers selling “to downscale due to life-stage” was by far the largest single group of home-sellers in the third quarter of 2017.
Charmaine Large, Executive Home Loans consultant at Evo Group, says what they are seeing is that retired or nearly retired borrowers may well have low debt, substantial assets and home equity, but may also be on a fixed income or pension and if that income is lower than what they used to earn this can hamper the approval of a home loan for their retirement home. She adds that bridging finance has now become a popular port of call for 60-somethings.
Iza Albutt, Marketing Manager at Bridge Flow, a Cape Town-based bridging finance company, says that they are able to accommodate this mature market looking to sell their family homes to buy in retirement villages with customisable finance solutions. “Unlike the banks, we don’t look at affordability based on income, we look to their assets and ensure that a firm exit strategy is in place, taking the time to find a way to help and explain every step of the process, and the incumbent expenses that can arise.”
A typical scenario where bridging finance can be of assistance is where an individual or couple wish to downscale, or acquire a property in a retirement home, and have found exactly what they have been looking for but have as yet not sold their existing un-bonded home.
The bridging finance company will assist the client/s in acquiring the home and secure the loan to them by registering a mortgage bond over the existing property affording them a six-month period, with the possibility of an extension of time, in order to sell their existing property and to repay the bridging company the loan.
It’s important to for retirees to know that other options do exist so that they can make an informed decision to make that all-important move, and to feel safe and secure, giving themselves and their children peace of mind.