Real estate Affordability of mortgages becomes difficult in retirement age

Many homeowners could have problems financing their mortgage when they retire. Many owners from the baby boomer generation are therefore threatened with an involuntary sale of their property.

According to Moneypark, a full 85% of owners aged between 50 and 65 today could have a "substantial" problem with the long-term affordability of their property when they retire. "Only 15 percent can sleep peacefully," the mortgage broker concluded on Wednesday by implication.

After all, around a third of the "at-risk" age group have sufficient assets to amortize their mortgage before retirement to the extent that sustainable affordability is guaranteed. However, many people put the issue of mortgage affordability in retirement on the back burner.

The majority of affordability rules stipulate that housing costs may not account for more than a third of household income. These housing costs consist of the cost of the mortgage plus ancillary costs and any amortization payments.

An imputed interest rate for mortgage debt of 5 percent is used to calculate housing costs. In addition, 1 percent of the property value is added for ancillary costs.

Housing costs increase after retirement

According to Moneypark, imputed housing costs currently account for an average of 27% of household income for 50- to 65-year-olds. However, with retirement and lower income, this proportion rises to 50 percent.

In order to achieve the maximum affordability of 33 percent, the mortgage amount must be reduced accordingly with a view to retirement. According to Moneypark, only 15 percent of homeowners do not have to amortize their mortgage when they retire.

Lukas Vogt, CEO of Moneypark, is quoted as saying: "Many of the baby boomer generation could be forced to pass on their home in the next few years and thus unexpectedly become the saviors of Generation Y, who will be able to fulfill their long-awaited dream home after all."

Moneypark bases these statements on an analysis of almost 3,000 home mortgages.

SDA