Consumer Corner: Are you 'generation late'? Here's what you need to know about buying a home
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As an election looms in the coming weeks the big topic facing politicians is housing. One of the main questions being asked is how are people able to afford a home these days?
The challenges that many people face when buying a home will mean that many are becoming homeowners later in life.
This group is known as the so-called ‘generation late’. However, is it ever too late to buy a pad and what are the challenges that might be faced?
John Mullane of Mullane Financial Services in Limerick says that depending on factors such as someone’s income, expenses, and the average house prices in their locality, securing a mortgage remains unattainable for many.
CSO statistics show that the average age of homebuyers rose from 35 to 39 years between 2010 and 2021 while the average age of homebuyers with a mortgage increased from 33 to 43 years. This is hardly surprising given that the average house price in 2023 was €327,500.
Despite this, John says that in almost all cases, it is still cheaper to buy than to rent in the long term.
“Given the trend of individuals taking out mortgages later in life, numerous homeowners may find themselves compelled to extend their working years well into retirement to meet mortgage obligations, rendering the vision of a mortgage-free retirement an increasingly elusive goal.
“As people prioritise other financial responsibilities in their 30s, like career advancement, family planning, or caring for elderly parents, they may inevitably find themselves entering the housing market later, thus prolonging their mortgage-paying years beyond retirement age.”
John says that some strategies can be put in place to lessen the likelihood of carrying mortgage payments into your later years, such as making extra payments towards your mortgage.
“This prudent financial move can yield substantial savings, potentially amounting to thousands or even tens of thousands in the long run. One compelling reason to consider overpaying on your mortgage is the significant reduction in interest payments. The larger your mortgage, the greater the interest bill that clocks up on it, often costing homeowners more than the principal itself, making overpayment particularly beneficial.
He says another major advantage to overpaying on your mortgage is that it expedites the process of paying down your home loan.
One of the main considerations to buying a home later in life is planning for retirement. Mark Reilly, Pensions Proposition Lead with Royal London Ireland says that to properly prepare for retirement, it is crucial that people have a good understanding of the nest egg needed to finance their regular or discretionary expenses as well as possible healthcare costs when they may no longer be receiving a regular income.
“Ireland’s increasing ageing population, along with the recent trend of people hitting key milestones later in life, makes this even more important. There are many reasons why people may buy their home later in life, the price of houses in Ireland today means that it often takes time to become financially ready to buy one, while lack of supply is also an issue.
However, taking out a mortgage late in life could see that debt follow you into your retirement years and in turn eat into your retirement income.” He says that while it might be tempting to top up your mortgage people should try to avoid doing this close to retirement.
“While you might consider this to fund home improvements or to give your child a deposit towards their first home, a top-up mortgage at that stage could put you under unnecessary financial pressure in your retirement years. Be aware too that unforeseen circumstances, such as an illness or redundancy, could see you struggle to repay a top-up loan.” According to a recent survey by Royal London Ireland, 26% of mortgage holders expect to continue paying their mortgages past the age of 65, with 8% expecting to continue making payments into their seventies.
Glenn Gaughran, head of business development with the Independent Trustee Company says that people should aim to clear any debt by the age of 66 or earlier.
“The biggest debt which most people will have is their mortgage. You may be able to get a mortgage up to the age of 70, depending on your bank. Avoid drawing out your mortgage that long because unless you clear your mortgage early, you’ll need to work until you’re 70 to pay your loan off.”
However he says that if you take out a mortgage late in life and envisage repaying that mortgage into your retirement years, it is crucial that you check the retirement income you can expect from your pension and ask yourself if this will be sufficient to both cover your mortgage repayments and give you the standard of living you would like when you retire.
“In the event that your retirement income will not be sufficient to do this, you should review and consider increasing your pension contributions, though be sure not to contribute more to your pension than you can get tax relief on."