Last-time buyers: Why move in later life and what challenges will you face?
The difficulties experienced by millennials looking to get onto the housing ladder are well-documented. But as first-time buyers struggle with a lack of affordable housing and the difficulty in saving a deposit, different challenges face those at the other end of the housing market: so-called ‘last-time buyers’.
A recent report by the Intermediary Mortgage Lenders Association found that last-time buyers – homeowners aged 55 or older who move – now total about 200,000 each year. This is equivalent to one in three of all movers in the owner-occupied sector.
That’s not to say that moving in later life is easy.
From deciding whether to downsize, to overcoming an emotional attachment to a family home, many obstacles face those looking to move into a house they intend to stay in for the rest of their lives.
Reasons you might opt to move in later life
Life expectancies are increasing and that means that our retirement income needs to go that little bit further. If you’re aged 65 today, the OECD says you can expect to live for another 18 years as a man and 21 years as a woman. But what if your pension income won’t stretch that far?
Moving to a smaller property could release some of the equity you’ve built up in your family home and allow you to live more comfortably.
You might be looking to release equity in your current home for other reasons. Maybe you have children and grandchildren that you’d like to help onto the property ladder or through university, or maybe you’d like to release funds to go travelling.
You might also feel the need to downsize your property for non-financial reasons, such as:
The stairs are becoming increasingly difficult to manage
Your house and garden are too big to maintain and clean
You’re living alone and want the companionship that comes from living in a different area or purpose-built retirement property.
It might be a combination of the above factors that is influencing your desire to move. Whatever your reason for downsizing, once you’ve made the decision, what challenges might stand in the way of you making it a reality?
3 challenges facing last-time buyers
1. Finding the right property
The first challenge facing you if you’re a last-time buyer is finding the right property.
In a recent Financial Times report, Dr Rachel Docking of the Centre for Ageing Better (CfAB) says: “The main reason most people don’t move into smaller properties in later life is that there is a chronic shortage of suitable and desirable alternatives.”
Whether you’re looking for a purpose-built retirement property, a smaller house, or a bungalow, the chances are you’ll want to be close to family and friends. Having a list of desirable features is only natural – and shared by buyers across the market – but it can limit the number of suitable properties.
Dr Docking adds: “Our ageing population has exposed the shortage of diverse housing options that are suitable for people as they grow older.”
This might mean compromise. Whether on the size of property or proximity to friends, finding the right property will be the first obstacle you face.
2. Attachment to current property
If you’ve lived in your current home for many years it will no doubt contain many memories.
Leaving a house in which you’ve spent a large part of your life can be difficult. Weighing up your desire – or your financial need – to move against the emotional upheaval of moving is an important step to take when deciding to downsize.
It might be the local area that you’re attached to, and you may have friends and family living locally. Due to the difficulties of finding a suitable property, you may find yourself considering a move away from an area where you have friends, feel safe and can actively engage in community life.
Finally, you might have aspirations to leave your current home to your family. Selling the property outright will prevent you from leaving it to your children, but it might free up cash that can be gifted or used in other ways.
Weighing up the value of your estate and the amount you’d like to leave to the next generation will play a part in your decision to downsize.
3. Getting a mortgage
Increasing numbers of people are borrowing into later life. A recent report in The Guardian confirms that 4 out of 10 first-time buyers anticipate taking a mortgage into retirement.
If your mortgage is paid off and you’re planning on buying for cash, that’s great. But if downsizing means taking out a new mortgage there are several challenges you might face:
Your age – At age 60, you might find you need to opt for a ten or 15-year mortgage, but this will mean your repayments are higher
Proving income – A mortgage lender will require proof that you can afford the repayments. If you have already retired, you might not have sufficient regular income to meet a lender’s requirements or might find the income harder to prove.
It’s not impossible to get a mortgage in later life, but it can be more difficult. And that’s where a financial adviser comes in.
Whether getting on the housing ladder for the first time or moving to the house in which you intend to spend the rest of your life, the decision to move is a difficult one to make and the act of moving is stressful.
In later life, the impact of the decisions you make can be felt even more keenly. Whatever your reasons for wanting to downsize, discuss your options with your adviser. They might raise issues you haven’t thought of.
If you decide downsizing is right for you – and that the time is right – an adviser can guide you through the process, giving you the confidence and peace of mind that whilst you’re making a big life decision, you have all the information at your disposal and a trusted professional there to guide you.