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accentro-hitzigallee
06 11 2014
Rent-free into retirement – property purchase with 50 plus

“Elderly” was yesterday: today the generation 50 plus calls itself the Best Agers. Many people of this age group are strong consumers and have high purchasing power, yet are demanding as well as quality-conscious. In many cases they enjoy satisfactory salaries and additional savings. For those reasons and given the increased life expectancy for tenants of this generation it appears reasonable for them to invest in real estate and therefore create the requirement for rent-free living during retirement.

Loans finance properties for the best years

If savings do not completely cover the purchase price, one currently finds excellent conditions for taking out a loan. Many banks appreciate Best Agers as borrowers for they usually have decent savings and therefore require only small loans. Thus, the financial development of Best Agers is more predictable than those of borrowers in their thirties. The reason: incomes like salary and pension of middle aged people rarely change.

Important when taking out a loan: flexible repayment terms and good amortization options

In order to start the retirement debt-free, a loan should be paid off as soon as possible. Useful is the arrangement of high amortization instalments. Full repayment loans offer a high planning certainty. Unlike traditional loans, this special agreement first of all determines the duration of the loan. Hence the monthly instalments are calculated. If endowment life insurances, building savings contracts or statutory pension insurances exist, a bullet loan might be the right choice. With this loan the borrower pays only the interests during the time of the loan duration and at the end the borrowed amount of money is due. When the loan cannot be paid off until retirement, one should negotiate flexible repayment options with the bank. Instalments can then be adjusted to lower incomes.

Even if a high amount of savings is available – an investment in a property is always a good choice. Profitable investment alternatives are currently very rare. To traditionally save money in a savings account does not pay off concerning yield revenues: with a valid interest rate of 0,05 percent (as of October 2014) and an inflation rate of approximately 1 percent (annual inflation 2014 thus far) this investment is not profitable any longer.