The canons of personal finance have perpetuated the idea that homeownership has to happen within a specific window, somewhere between 25 and 40 years old. After that ? Hiiiish, it’s late!
It has nothing to do with the fertility of buyers, but rather with the standard mortgage amortization period of 25 years.
What is 25 plus 40? 65! And what have the priests been telling us about forever? That we must enter retirement (65 years) free of debt!
When we see a fiftieth year old resorting to the home ownership regime (HBP), it seems as incongruous to us as if he was playing TikTok on a Cardi B song. is over his age.
Yves Ferragu does not take offense, him. He just got a mortgage loan for an 80-year-old couple!
“They were in a retirement home, and with COVID, they could no longer be locked in their homes,” says the Multi-Prêts mortgage broker.
And you know what ? The octogenarians bought a condo with a loan amortized over … 25 years!
Hold on young people! (And the priests!)
Pay for accommodation
Owning a property doesn’t have so much to do with age as it does with means, and the means are often older people who have them.
For the same home, the rental and purchase costs do not differ that much, even taking into account that the owner will get some of his money back.
We tend to forget that homeownership involves expenses that will never be recovered, such as maintenance costs or contributions to a contingency fund, as well as taxes and mortgage interest.
However, it has this undeniable advantage that it allows you to fit out your home to your liking. Also, the offer on the market is still much more varied for buyers than for tenants. Buying opens the door to more possibilities.
When you leave a rent in order to acquire a house or an apartment, you must not kid yourself, it is less to enrich yourself than to improve your comfort. If we start from an upper duplex that has not been renovated in 25 years for a new condo in a condominium with elevator and pool, we are not doing it to save money, because it will cost more.
So, whether you’re 35 or 65, it will always be a question of resources.
“It is often easier to assess when we approach retirement, because we know our income and our cost of living,” explains Éric Brassard, CPA and financial planner, partner at the financial services firm Brassard Goulet Yargeau, of Quebec.
A mortgage at retirement?
Financial institutions are not reluctant to grant mortgages to seniors, as long as they demonstrate their ability to repay.
With younger buyers showing up with a meager down payment, lenders will use tougher ratios.
“But from the moment the buyer arrives with 35% or more down payment, the bank can lend at higher ratios, and therefore more accommodating for the buyer,” says broker Yves Ferragu.
According to him, it will always be easier to qualify by buying before retirement, because the ratios are calculated from income, usually higher in working life.
But a retiree with a good credit record and well-stocked investment accounts will always find a lender willing to satisfy him, even if his only cash inflows are limited to the Quebec Pension Plan and his Social Security pension. old age.
The opportunity cost
The necessary down payment is still a nice bundle of money suddenly tied up in a property. The sum is trapped in the house and it can hardly be used for anything else, which can be unfortunate … unless you have provided a home equity line of credit when negotiating the loan.
A must, according to Éric Brassard: “If my house is worth $ 500,000 and it is largely paid for, if the margin allows you to take out $ 10,000 from time to time to take trips during retirement, why leave? deprive? “
Too many retirees give up on their dreams because they have been instilled with the idea of leaving the workforce debt-free and dying with a paid home.
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