How to secure your dream retirement home before it’s too late

Image: Evergreen Lifestyle Retirement Villages

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• Retirees face tough lender scrutiny and shorter loan terms, restricting access to home finance.
• Planning before age 50 dramatically improves affordability and approval odds.
• Multiple funding options exist, but each carries risk, trade-offs and tax implications.

Why retirees struggle to buy property

‍Buying a home later in life is far harder than most South Africans realise. Many retirees discover, often too late, that banks view them as high-risk borrowers, resulting in tighter conditions, reduced loan terms or outright rejection.

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“Banks and other lenders are reluctant to offer home loans to retirees because of a higher risk of delinquency,” says Renier Kriek, Managing Director of Sentinel Homes. Wealthier applicants with strong portfolios stand a better chance, but for the average retiree the pathway is narrow and the hurdles are significant.

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The obstacles standing between retirees and home ownership

1. The “75 Rule”: Age limits shrink loan terms

Most lenders insist a borrower must settle their home loan before turning 75.

This sharply limits how much a retiree can borrow and compresses their repayment term.

A 65 year-old, for example, would only qualify for a 10-year bond, pushing monthly repayments 75% higher than those of a younger buyer.

2. Affordability: Pension income isn’t enough

Banks rarely approve loans based solely on pension income. Lenders demand proof of stable earnings, either active income or diversified passive income streams, to ensure retirees can service higher instalments over shorter terms.

3. Planning too late

Most retirees start thinking about buying a retirement home after they’ve stopped working, precisely when lenders become least willing to fund them.

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“To secure affordable terms, one really needs to apply before 50,” says Kriek.

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“You have to think about how you are going to qualify for and service the debt when you either don’t want to or cannot work anymore.”

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Funding options for Retirement Home Buyers

Renting
A flexible option, but many landlords avoid elderly tenants due to the difficulty of eviction under South Africa’s rental laws.

Using your pension
Pension withdrawals can help fund a deposit or repayments, but this erodes long-term lifestyle security, and withdrawals may trigger significant tax.

Cashing out pension savings
The new two pot system restricts access and immediately taxes withdrawals at your highest marginal rate, reducing value by up to 45%.

Pension-backed loans
Available through some funds, but defaulting puts your retirement capital, the only safety net you have directly at risk.

Buying a life right
Often cheaper and cash-only. You gain occupation rights but not ownership, meaning the unit does not form part of your estate.

Alternative financing providers
Flexible instalment-sale arrangements, like those offered by Sentinel Homes, give retirees another route.

These require higher deposits and robust proof of diversified income, but can offer more accessible, tailored solutions than traditional banks.

Retiring sensibly: A reality check
A retirement home should be planned long before you actually need one. Avoiding the conversation delays the inevitable and limits your options.

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“You need to face reality and prepare yourself for that eventuality, including where you will live and how you will fund that all important purchase, especially since mortgage lenders likely won’t help when you arrive at retirement,” says Kriek.

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Planning ahead, financially, emotionally and logistically, is the only way to secure a safe, affordable home near essential care facilities. The earlier you prepare, the more options and bargaining power you retain.

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