Just because you have bought and sold properties before doesn't mean you can't make mistakes. And you need to get that all-important last home right.
The family home is cherished by many, and it's difficult to let go of. But sentimentality doesn't pay the bills and sometimes a large family home simply becomes unmanageable as the occupants get older.
There are many reasons that older homeowners decide to move house and there is certainly no typical
last-time buyer. Some upgrade to their dream property because they have the money, want a bigger home, and why shouldn't they? Others move to be closer to family, especially when grandchildren come along.
Many downsize to release equity to help fund retirement, while others are motivated by the lower running costs of a smaller home. For older homeowners with mobility issues, bungalows become attractive as do small retirement flats in buildings with lifts.
It's each to their own, of course, but whatever your reason for a last-time buy, make sure you consider all of your options first. The tips below include some of the major things you should consider, but remember to take independent and professional advice if you want to be clear how your home could affect your inheritance, cost of care and eligibility for State benefits.
1. Don't overstretch yourself
It sounds obvious, but many people do overstretch themselves on their last purchase, because they want that really special home and they figure they can afford it at the moment.
But ill health doesn't always come with a warning, and it's a sad fact of life that serious illness is more common when you reach your sixties and beyond. You might be planning to work until you are 75 but your body may not agree. Equally you might get made redundant and there isn't exactly an abundance of jobs out there. Many older jobseekers reckon it's particularly hard for them to find work in the current climate.
Mortgage lenders will also restrict your ability to borrow into your old age, with most limiting mortgage terms to finish by your 75th birthday, and of course you have to prove that your income stacks up. But it's up to you to be cautious too, because if you get it wrong you may have to sell your dream home, and there are no guarantees that you will get the price you want for it.
2. Consider downsizing
It can sound pretty patronising when well-meaning younger people suggest that you should downsize, because why the heck should you? Indeed, if you are in your fifties or sixties you may not feel particularly old or immobile.
Nevertheless, many last-time buyers do decide to downsize to a smaller property that will be more manageable when they are older. And it's certainly worth considering, because a property that is easier to get around is a home you can stay in for longer if you do become ill or have impaired mobility. If you intend this move to be your last, it makes sense to consider a property that will suit your final years, as well as the next few.
Smaller homes are also easier to clean and cheaper to heat – something that might become important when you are not working, and possibly spending more time in your property than you currently do.
3. Location, location, location
You may picture yourself spending your later years in an idyllic rural retreat, and that's ideal for some. No doubt you currently drive a car and can easily get to where you need to be. There is no reason you can't drive a car until the day you die, but in practice many people do stop driving in their later years, or cut down the number of longer journeys they need to make.
Because of this it's important to consider access to public transport when you think about the location of your last-time buy.
Equally, a property within a bustling community gives you access to other people, shops, libraries, doctors and other amenities. These things do become more important when you retire and also sadly, if you lose a partner. The notion of being isolated seems quite alien to those of us with busy lives, but the fact is that's exactly how many older people on their own feel.
4. Be practical
- 1. No savings
Figures from charity Age UK show that 29% of those over 60 feel uncertain or negative about their current financial situation - with millions facing poverty and hardship. Even though saving for retirement is not much fun, the message is therefore that having to rely on dwindling state benefits in retirement is even less so. To avoid ending up in this situation, adviser Hargreaves Lansdown recommends saving a proportion of your salary equal to half your age at the time of starting a pension. In other words, if you are 30 when you start a pension, you should put in 15% throughout your working life. If you start at 24, saving 12% of your salary a year should produce a similar return.</p>
- 3. Mortgage debts
Recent research from <a href="http://globalcare.aviva.co.uk/">Aviva</a> found that 17% of over-55s are still paying off a mortgage, with an average of £63,555 left to clear. And figures from equity release lender More 2 Life suggest that more than 100,000 over-65s are still struggling to pay off their mortgages. The pre-recession popularity of interest-only mortgages and the poor performance of linked investment vehicles, as well as the average age of a first-time buyer rising to 35, are among the reasons why. But meeting monthly mortgage repayments during retirement can have a big impact on day-to-day living costs such as food and household bills. Ways to avoid being caught out include taking out a mortgage over a shorter term that leaves you well clear by retirement age and overpaying on your mortgage when you can. If it is too late for that, downsizing could be an option, while equity release plans could also be worth a look.</p>
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- 4. Deal with default notices
<p>A default notice is note that a lender puts on your credit file if you fall behind with your payments. It is a warning sign to future lenders about your reliability to repay credit and could mean that they will be less likely to lend to you or will increase the interest rate.</p>
<p>If the default notice is incorrect, perhaps because you have repaid the loan in full or did not take out the credit and suspect that you have fallen victim to fraud, you can apply to have a default notice removed. A default notices will only be removed if it is factually incorrect – not simply because you are embarrassed by it.</p>
- 4. Huge care costs
The cost of a room in a care home in many parts of the country is now over £30,000 a year, according to figures from Prestige Nursing and Care. So even if the prime minister announces a cap on care costs - last year the economist Andrew Dilnot called for a new system of funding which would mean that no one would pay more than £35,000 for lifetime care - families will still face huge accommodation costs. Ways to cut this cost include opting for home care rather than a care home. Jonathan Bruce, managing director of Prestige Nursing and Care, said: "For older people who may need care in the shorter term, home care is an option which allows people to maintain their independence for longer while living in their own home and should be included in the cap." However, the only other answer is to save more while you can.</p>
- 5. Fraud
Older Britons are often targeted by unscrupulous criminals - especially if they have a bit of money put away. For example, many over 50s were victims of the so-called courier scam that tricked into keying their pin numbers into their phones and handing their cards to "couriers" who visited their homes. It parted consumers from £1.5 million in under two years. Detective Chief Inspector Paul Barnard, head of the bank sponsored dedicated cheque and plastic crime unit (DCPCU), said: "Many of us feel confident that we can spot fraudsters, but this type of crime can be sophisticated and could happen to anyone." The same is true of boiler room scams that target wealthier Britons with money to invest, offering "once-in-a-lifetime" opportunities to snap up shares at bargain prices. Tactics to watch out for include cold calling, putting you under pressure to pay up or lose the opportunity for good, and claiming to have insider information that they are prepared to share with you.</p>
- 6. Unpaid taxes
The average UK pensioner household faces a £111,400 tax bill in retirement as increasing longevity means pensioners are living on average up to 19 years past the age of 65, according to figures from MetLife. And every year in retirement adds an extra £5864 in direct and indirect taxes based on current tax rates to the costs for the average pensioner household. You can be forced to go bankrupt if you fail to pay your taxes, so it is vital to factor these costs into your retirement planning.It is also important to check that you are receiving all the benefits and tax breaks you are entitled to if you want to make the most of your retirement cash.</p>
- 7. Rule changes
Even the best laid plans can be derailed should the government change pension rules - especially for those already in retirement. Take income drawdown. About 400,000 individuals have set up their pensions on this basis that allows them to keep their fund intact while drawing an income, rather than buying a poor value annuity. The income they can take is therefore linked to the 'GAD rate' – set by the Government Actuary's Department and determined by the prevailing yield from a 15-year Government bond (gilt). But despite 15-year gilt yields falling sharply, the government last year slashed the maximum income that could be drawn down from 120% to 100% of the GAD rate due to fears that savers were depleting their pension pots too quickly. Many pensioners have seen their incomes plunge by more than 50% as a result - and there is very little they can do about it.</p>
Many people would baulk at the idea of a retirement flat because, even though they are available to over 55s, there is a perception that they are really more suitable for much older residents. And some people mistakenly think that purpose-built retirement flats are a bit like old people's homes. Of course, they are nothing like that (and there's nothing wrong with old people's homes anyway!), with residents having their own flat and total privacy, like in any other apartment building.
They might have benefits that could prove useful later in life though – like accessible shower baths, 24-hour security, lifts to all floors, and access to care. Plus you are less likely to find that your neighbours are party animals (though it's possible).
They can also be good value and are usually located close to transport links and amenities. Contrast this with a quaint country cottage that might look just perfect, until you try to manage the crooked stairs, low doorframes and two mile walk to the post office.
5. Get advice
When it comes to your last-time property purchase, many older homebuyers are considering their inheritance. Perhaps you are thinking of downsizing to release equity to gift to your children now, or perhaps you want to upgrade to a more valuable home that you want to pass on.
Whatever your preference, it's crucial that you seek both financial, legal and tax advice. Not only are there issues surrounding Inheritance Tax, but increasingly people are beginning to think about the possible cost of long-term care and your property's value comes into play here, along with your other assets.
You need to be clear about how gifting money and property to your children works because if you get it wrong there could be unintended consequences that affect you and your children. A good legal and tax adviser will be able to explain your options, and a financial adviser will look at the best deals available if you are planning to buy your last home with a mortgage, or if you are considering releasing equity in the future.