5 Things To Know About Buying Real Estate Later in Life
Baby boomers and older Gen Xers may have a healthy dose of life experience, but not all have experienced buying a home before.
For those who have been lifelong renters, or who perhaps inherited property, and are now looking to buy a home on your own for the first time, it’s important to realize that your situation might look a little different than some other first-time homebuyers, like millennials.
In some ways, waiting to buy a home until later in life can give you an edge over younger buyers. But your preferences may also differ, and the available housing supply might not align as much with what you’re looking for.
If you’re buying real estate for the first time later in life, consider the following:.
More Savings Can Provide an Advantage
If you’ve had more time to build up your savings/investments that you can use for a down payment, that could give you an advantage in competitive housing markets. In situations where a home has multiple offers, sellers might choose buyers that offer larger down payments or full cash offers in the hopes that the deal would be more likely to close.
“When it comes to buying just about anything, cash is king, and buyers that are in later stages of life are going to have more cash on hand. That can give them a considerable advantage over younger buyers, who will need to lean on financing to purchase a home,” said Cody Horvat, licensed real estate broker at The Scott Group, a division of Compass.
Plus, the more savings you put toward a down payment, the lower your monthly payments on a mortgage, as you’re borrowing less.
A High Credit Score Can Help
Similar to having more time to build up savings, boomers and Gen Xers may have an advantage in terms of having more time to build a strong credit history. Even if you made financial mistakes in early adulthood, perhaps enough time has passed that those no longer affect your credit. Generally, negative information, including bankruptcies, falls off your credit report within seven to 10 years, according to Equifax.
“Older buyers are likely to have a better credit history than their younger counterparts,” said Horvat. “This can help them receive better financing options.”
If you qualify for a lower mortgage rate, that could potentially increase your options in terms of affordable homes. Meanwhile, younger buyers might have to cap their home search at a lower price point, if lower credit scores mean higher monthly payments.
Finding the Right Home Can Get Harder
While age can work to your advantage in terms of building up your savings and credit score, it’s possible that finding a home that meets your needs later in life gets a little tougher.
“For many older buyers, peace and quiet is a luxury that is hard to put a number on. This can limit the number of properties they may be interested in, as the neighborhood might be too lively, there are trains nearby or the walls are on the thin side,” said Horvat.
“Additionally, the cost gap between a single-family home and an attached property can be considerable in many cities. If that is non-negotiable, it may be difficult to find a home within their budget, depending on where they are located,” he added.
Plus, if you’re buying a home later in life, you might want to plan ahead for retirement and aging in place, which can limit relevant supply.
“Finding a home that suits their lifestyle, like one-floor living for easier accessibility, can also be difficult, especially in markets dominated by homes designed for growing families,” said Shannon Feick, co-owner and co-founder at ASAP Properties, LLC.
A Typical Mortgage Might Not Work for You
Another issue to consider is that your mortgage needs might differ from younger buyers, and that can affect costs.
“One challenge for first-time buyers later in life is that a 30-year mortgage may not align with their financial planning towards retirement. They’ll typically need a shorter loan term with higher monthly payments,” said Feick.
Getting a shorter mortgage can enable you to pay off your home before or in the early part of retirement, so you’re not saddled with debt. But that could limit your housing search to lower price points, given the higher mortgage costs.
Experience Can Be Valuable
Lastly, even if this is your first time buying a home, your life experience can be helpful when it comes to finding the right home at a good price.
“Being able to watch the housing market for years, they may be more knowledgeable first-time home buyers,” said Evan Sophir, real estate agent at The Keyes Company.
“For instance, they know first-hand where the market has been compared to where it is now. They know where interest rates were and how they have progressed,” he added.
In addition to potentially being able to better spot good deals, you may have more certainty over what you want, and you might be better positioned to make a quick commitment to scoop up a home in a hot area.
“Later in life, you may have a better idea of the location you’d like to be in, as well, and may have a safer, more consistent stream of income as opposed to earlier in life,” added Sophir.
Overall, buying a home later in life for the first time might stray from the typical path, but that’s not necessarily a bad thing. You might be better positioned to use your experience, savings and credit score to your advantage, but be aware of potential pitfalls, like more narrow parameters for housing types and mortgage options that don’t work for your situation.