While we are very interested in the age of the first real estate purchase, many seniors also want to take advantage of low rates to buy more suitable housing, a second home or even invest! Vousfinancer, a network of 200 credit brokerage agencies, looked at the age up to which one can buy, the difficulties that can be encountered in borrowing, as well as the real estate purchasing power of retirees in more than 35 cities in France. In 2020, only 12% of borrowers are over 50 years old, a figure that is down slightly due to the drop in usury rates in particular, a real obstacle to senior citizens’ access to credit …
Borrowing at the age of 50, it’s possible … but at the age of 60 it’s rarer
At Vousfinancer, only 12% of borrowers are over 50 in 2020, compared to 17% in 2019, a decline in a context of tightening conditions for granting credit and a drop in the usury rate, the maximum rate at which it is possible to borrow … Only 3% are currently over the age of 60. In particular, the transition to retirement age, with the drop in income that this generates, which can range from 15 to 40% depending on the case. Thus in 2020, among Vousfinancer clients, if only 25% of borrowers aged 50 to 59 have incomes of less than € 25,000 per year, at age 60, 50%, i.e. twice as much, are in the bracket. lowest income.
“We note a decline in the share of borrowers over 50 in 2020, linked in particular to the tightening of the conditions for granting credit, in particular concerning the maximum debt ratio, and the drop in the usury rate,” which penalizes the oldest borrowers because of the insurance rate which can quickly climb! Only 3% of our customers are retired when they take out a loan … whereas at this rate level, it makes sense to borrow, but the sooner the better, precisely to build up assets and prepare for retirement! ” analysis Julie Bachet, Managing Director of Vousfinancer.
It is therefore theoretically never too late to borrow, especially as solutions exist, even if it is better to do it all the same when you are still in activity.
Seniors, good customers for banks… but often blocked by the usury rate!
Even if seniors sometimes have savings, when possible, they have every interest in borrowing rather than mobilizing their investments if they want to invest in real estate, for several reasons:
The rates are very low, especially on short terms: on average, 0.8% over 10 years, 1% over 15 years and 1.20% over 20 years. In addition, the credit rates do not depend on the age of the borrower (except exceptional reduction for those under 35) but only on the contribution or income. Seniors are therefore not penalized on the credit rate.
By borrowing, they benefit from the leverage effect of credit and increase their wealth. In the event of death, the property is reimbursed in full by insurance and passed on to beneficiaries … It is therefore also a way of preparing for succession .
In addition, seniors are considered good profiles for banks for several reasons: Seniors borrow for short periods – 15 years on average -, have a contribution, life insurance or are already owners which offers guarantees for the bank, and they often have lower charges because they no longer have dependent children … but the other side of the coin is that they are already banked, may have health problems resulting in a higher insurance cost that can make them difficult to finance, and income that must be expected to drop at the time of retirement..
Thus, from the age of 55, when applying for a mortgage, almost all banks ask for an estimate of the amount of the pension that will be paid, proof which must be requested from your pension organization. . Depending on the borrower’s age and his retirement date, they take into account either the full-rate salary, or more often the income at the time of retirement, to calculate the rate. indebtedness.
A solution can also be the establishment of a tiered loan, making it possible to lower the maturity of the credit by 30% at the time of the transition to retirement and therefore to adapt its monthly payments to the drop in income to keep despite everything a comfortable standard of living. Thus, a 57-year-old woman with € 1,800 in net income was able to obtain a tiered loan of € 100,000, at 1.35% over 20 years (+ 1.03% insurance) with € 10,000 contribution. The first monthly payments are 620 € insurance included until his retirement at 65, then will increase to 425 € when his income drops (Vousfinancer Grenoble agency).
One of the major problems that we encounter with the loan of seniors is, that due to the much higher insurance rate, but also to the fact that seniors borrow for shorter periods, the weight of the insurance is such as the APR, annual percentage rate, exceeds the usury rate (2.52% over 10 to less than 20 years, all costs included), the maximum rate beyond which banks are not allowed to lend.
One of the major concerns that we encounter when we want to finance seniors is exceeding the wear rate: often they need a dry bridging loan, or a short-term loan, with a high insurance rate… The ancillary costs to credit are therefore spread over a short period, which reinforces their weight in the APR which often exceeds the usury rate and therefore leads to a loan refusal. In these cases, a solution may be to find a bank in which the death insurance is optional and therefore not included in the calculation of the APR.
Loan insurance, the main issue for senior borrowing
If there is theoretically no age limit for taking out a loan, it is limited by the maximum age of loan insurance coverage. Most banks agree to cover the borrower with group insurance up to the age of 75, the age of the loan end which allows theoretically to borrow at 55 years over a period of 19 years. With an insurance delegation, the coverage can go up to 90 years or even 95 years, age of end of loan…
As an indication, overall on average and without additional premium linked to a specific health problem, insurance rates for a 10-year loan for a 50-year-old borrower range from 0.40% to 0.60%, while at over 60 years they reach double, between 0.80 and 1, 20% … In the current context of very low interest rates, the overall cost of insurance can then exceed the total amount of interest paid and represent up to 60% of the total cost of credit.
Example: 54-year-old couple taking out a loan of € 270,000 at 1.3% over 20 years with group insurance at 0.946% (on the outstanding capital, with constant maturity)
“One of the main topics for seniors who want to invest in real estate is that of loan insurance, because the older we get, the more the probability of having health problems increases and therefore the more the insurance. is expensive … In certain cases of illnesses, chronic or not, the premium is such that it is better to opt for financing without insurance when the bank allows it, by taking another asset as collateral for example, or by insuring only the spouse the youngest or in good health ” advises Julie Bachet.
Example of recently funded senior files:
Couple of 54 and 59 years old, with € 3,000 of income / month, borrowing € 218,000 on 25 years, at 1.5%, for the purchase of a house with a contribution of € 18,000 and delegated insurance at 0.406 and 0.532% (Vousfinancer Tournon agency)
60 year old woman, 4,200 € of income / month, at retirement in 2 years for an amount of 3,800 €, buying new housing at 415,000 € with 210,000 € of contribution. Credit of € 205,000 to 0.7% over 13 years, with 0.56% insurance (Vousfinancer Villefranche agency)
Couple aged 61 and 63, civil servant and retired, € 3,200 in income, who buys an apartment of € 185,000 off-plan near Saint-Etienne, with € 35,000 of contribution. Credit of € 158,000 at 2.25% over 20 years, without insurance, because banks refused because of age and the rate of wear (Vousfinancer Lyon 1 and 2 agency)
Couple of 63 and 66 years old, retired and inactive, retirement of € 4,600, dry relay of € 265,000, with € 55,000 to 0.95% over 1 year, without insurance, because with an insurance at 0.9%, the rate of wear was exceeded, therefore refusal! (Vousfinancer Corbeil agency)
Couple of 73 and 72 years old, € 6,000 of retirement and rental income at 2, purchase for rental investment at € 380,000 at 1.80% over 14 years including 36 months deferred, contribution of € 190,000, financing of € 216,000, death insurance at 1.77% and 1.81% with an end-of-loan age of 88 (max 95 years old)
Couple of 70 and 67 years old, 4,000 € of income, purchase of a house by the sea, with 150,000 € of contribution. Credit of € 360,000 to 1.80% over 15 years, without insurance because uninsurable for health reasons (Vousfinancer Challans agency)
What real estate purchasing power for retirees?
On average, according to figures recently released by the Cnav, in 2019 (latest data available), the amount of the basic monthly pension for French people who have spent their entire career under the general scheme is € 1,064 compared to € 1,091 in 2018 and € 1,086 in 2017, with differences according to the sexes – that of men is 23% higher than that of women (€ 1,232 against € 1,000, down for women), a widening gap (15.6% gap in 2018 ) – and regions.
Thus Vousfinancer has calculated the borrowing capacity over 15 years with an average retirement pension by region and the associated real estate purchasing power. (excluding insurance), with 10% contribution to finance costs. Borrowing with a basic retirement pension is now complicated in large cities, since a single retiree can afford 6 m2 in Paris, 12 m2 in Lyon, 13 m2 in Bordeaux, 20 m2 in Marseille and Nantes and at better 57 m2 in Saint-Etienne. Fortunately, at over 65, 75% of French people already own their main residence … but this confirms the fact that it is better to buy as soon as possible so as not to have to do so when you retire, and ideally not to have any more expenses. monthly loan.
Indeed, at age 60, according to Vousfinancer data, only 7% of borrowers are first-time buyers, against 17% between 50 and 59 years old but 65% for those under 30!
We note that in medium-sized cities, cities which often offer the best living environment for retirees, purchasing power is fortunately much higher! Thus in Bourges or Limoges, you can buy 42 or 43 m2 with an average pension, 41 m2 in Le Mans, 31 m2 in Le Havre, 29 m2 in Nîmes, an area to be doubled if you buy as a couple, with the same income.. On the other hand, in the more attractive cities like Nice, Cannes, Antibes or Aix-en-Provence where the prices are much higher, it will be necessary to be satisfied with 13 m2 alone, or 26 m2 for two …