Am I ‘too old’ to buy a house?

They say you’re never too old to learn, but is there a limit when it comes to buying a house?

The answer feels like a resounding no, especially when the average age for a homebuyer is now 59 years old, according to the National Association of Realtors®.

Moreover, the average age of first-time buyers has also increased: potential buyers now need until age 40 to realize the American dream.

But what if you’re 65? And retired? Are you really at the right age to think about buying a house?

That largely depends on where you are financially and whether you are able to handle the increased financial strain of owning a home in recent years.

But experts still agree that if you’re financially stable, owning a home at any age is the right investment, and as an added bonus, it can benefit your family for years to come.

Advice to older home buyers from Suze Orman

Let’s take a real-life example and investigate. On her podcast “Women & Money”, financial advisor Suze Orman received a letter from a listener asking if buying a house at age 65 would mean failure.

Orman quickly told her to go for it, but only after she had completed a fairly informative and fruitful assignment.

“I want you to do something called a ‘playhouse,’” Orman said, suggesting that the best way to know if the senior can afford the finances for a home was to go through the motions. The first step would be to set up the start-up capital.

“You’re going to hopefully put down at least 20%,” she began. “In addition to the amount of money you are going to put down, you also need an emergency fund for eight to 12 months.”

Then it was time to talk about a mortgage.

“Honestly, you should get a 15-year fixed-rate mortgage because you still don’t want to have a mortgage at 95,” Orman suggested. “You want it to have paid off by the time you’re 80.”

With these numbers in hand, Orman asked her listener to make a list of all the bills that come with homeownership: mortgage, insurance, property taxes, monthly maintenance costs and an emergency fund.

She advised her listener to add up the total and find the difference between what she pays now, while still renting, and how much extra she would need to buy a house. Then the real test would begin.

“Take at the beginning of each month for the next six months [the difference] and put it in a money market account or an account that pays interest, and see how that feels. Are you late? Can you do this on the first of every month? If you can do that, and it’s easy, then I have news for you: your job is stable or your income is sustainable for a long time, so yes, you can afford to buy a house.’

Now comes the best part: if you can pay off the payments, all the money you put away can now be used for a down payment. If not, you still saved some money, which is never a bad thing.

Buy early and build wealth

Ideally, if you’re over 60, you already own a property and are just looking for your next home.

If that’s the case, the good news is that you’ve probably built up enough equity in your existing home to make an easy move possible. Buying early proves to be the biggest benefit for homeowners.

For example, those who bought a home at age 30, the average age they first bought a home in 1990, have 22.5% greater wealth at age 50 compared to those who bought a home in their mid-40s, according to the Realtor.com® Generational Wealth Report.

But even if you’re 40, 50, or 60 years old, buying for the first time is in your best interest if one of your goals is accumulating wealth.

According to the Federal Reserve’s Survey of Consumer Finances, homeowners enjoy a significant financial advantage over renters, at about 38 times net worth.

To give perspective, Florida and the Southeast have proven to be standout markets for boomers and older homeowners where home equity has increased to significant heights since 2019.

Research from Realtor.com shows that Spartanburg, SC, ranks first, where home equity has grown 135.4%, or $8.8 billion, in recent years, while Gainesville, FL, ranks second, with a gain of 133.2%, or $10.9 billion.

What older buyers are looking for

“As people live longer, there are buyers moving into their 70s and 80s,” he says Cara Ameer, a real estate agent in Florida and California.

She explains that it’s not surprising that more people over the age of 65 are considering a home purchase, especially for those who have enough cash on hand.

“At this age, most people pay in cash,” Ameer explains. “Or if they qualify, they do a reverse mortgage, which usually involves not taking out a large loan or term to pay it off.”

But no matter how they finance the purchase, the main goal for seniors looking to buy is to settle in a place just for them. While grandchildren and living near adult children are always a “big draw,” Ameer says moving after retirement is about adopting a new “lifestyle.”

“After 75, it’s about health, aging, access to good health care, assisted living and, most importantly, being close to family who can help care for them when needed.”

She adds, “Location usually plays a role if the retiree is younger and wants to enjoy a nice climate and no state income tax, or a lower tax rate like in Florida, Nevada, Texas or Arizona. But not so much once they reach an age where they have to consider being close to family.”