The short version
- Lenders can't refuse you for your age, but they'll ask how you'll repay the loan, called an exit strategy.
- Many lenders count the Age Pension and super income, often alongside other income.
- The government's Home Equity Access Scheme lets you borrow against your home for a regular income.
Can pensioners get home loans in the Australian housing market? Yes, they can. But older Australians trying to get a home loan may face challenges that younger people do not.
We have done the research to help you find out more about home loan options for pensioners and the types of assistance available. Read on to find out about the documents you need and what lenders consider so you can apply successfully as a pensioner.
What options are available for pensioners?
As a pensioner, you can choose from various types of home loan. However, your options with traditional lenders may be limited because your age puts you in a high risk category from a lender's point of view. You may need to consider non-traditional lenders that are more flexible.
Variable and fixed rate pensioner home loans
Some lenders may offer regular variable and fixed rate loans to pensioners.
- Fixed rate home loans allow you to lock in the interest rate for a period of time, usually from one to five years. During that time, you will know exactly what your monthly loan payment will be since the rate will not change.
- Variable rate home loans have rates that can change, typically when the RBA changes its cash rate. Variable rates can go up or down. As a result, you will not know exactly how much you need to pay on a monthly basis. This is less of an issue in the short term, but harder to forecast several years out.
Your home loan interest rates on either type may vary depending on a number of factors:
- Whether you are buying a home to live in or as a residential investment.
- Whether you plan to pay back principal and interest or interest only.
- The amount you wish to borrow as a percentage of property value.
Bridging loans
Bridging loans are a type of short term loan used to cover the gap between buying their new home and selling the old. They are most typically used because of upgrading or downsizing property.
Closed bridging loans are used when your Contract of Sale is finalised and you know when you will receive funds. Otherwise you can use an open bridging loan that lasts up to 12 months.
Interest is payable once the sale is completed and the bridging loan has been closed. You may choose to make payments on the loan to reduce interest costs. Stamp duty, legal fees and other upfront costs can be added to a bridging loan when there is sufficient equity and property value.
Reverse mortgages
A reverse mortgage is a type of loan where the money you borrow is secured against the value of your home.
Eligibility depends on your age, home ownership and your original mortgage. How much you can borrow also depends on your age.
Find out more about how reverse mortgages work and answers to frequently asked questions.
Line of credit home loans
If you are a pensioner looking to get your hands on some extra funds, a line of credit home loan is another option you can explore.
A line of credit is a pre-arranged amount of money you can draw on, either at once or over a period of time.
To be eligible, you have to own a property and have available equity on it. On a line of credit you have to pay an interest-only monthly payment as minimum due. Lines of credit usually carry higher interest rates and can become rather costly if you do not work on reducing the balance.
Investment home loans
If you do not own a property, but are the recipient of an Age Pension, you may still be eligible for an investment home loan to buy a property as an investment. Lenders will consider potential rental income on that property when evaluating your investment home loan application.
Rental income can be used to cover your mortgage payments on the property. What is left over will be an additional source of income for you. Beware that your additional income may affect your pension and other government entitlements.
To find out how your benefits could be affected, contact a Financial Information Service Officer at Centrelink.
How to convert an investment property into a primary residence.
What assistance is available to pensioners?
Several state and federal schemes can help pensioners with the cost of a home.
Home Equity Access Scheme
The Home Equity Access Scheme, called the Pension Loans Scheme until July 2022, enables older Australians to obtain a non-taxable loan from the Australian Government, rather than a commercial bank or lender, secured against property they own. Your fortnightly loan and pension payments combined can reach 1.5 times the maximum rate of the pension. You can also take part of it as a lump sum in advance.
To be eligible, you or your partner must be of Age Pension age, or eligible for a qualifying pension. You need to own real estate in Australia with appropriate insurance that you can use as security. Bankruptcy and personal insolvency disqualify you for this loan scheme. Interest is charged on the loan and added to the balance, which is usually repaid when the home is sold.
One-off concessions
Some states and territories, including Victoria, the ACT and the NT, offer pensioners a stamp duty exemption or concession when they buy a home to live in, often to help with downsizing to a more suitable home. Price limits and other conditions apply, so check with your state revenue office.
If you're 55 or older and sell a home you've owned for at least 10 years, you may also be able to put up to $300,000 of the sale proceeds into your super as a downsizer contribution.
Considerations for pensioners
Looking at it from a lender's point of view, you can appreciate that their main concern is your ability to repay the home loan and their exposure to the risk that you can't.
Just as with any other loan applicant, you will be asked to show some proof as follows.
- Income. Regular cash inflow offers proof that you are able to pay off the loan. This can come from a job, part time employment, investments, or from a pension.
- Pension status. Being a recipient of the Age Pension, a disability pension or a veteran's pension is acceptable to some lenders, alongside other income.
- Exit strategy. If the loan term runs past your expected retirement or into your later years, lenders must ask how you'll repay it, such as by downsizing or from super.
- Credit history. You will need a clean credit history to be eligible for a pensioner home loan.
What documents do you need?
Pensioners applying for a home loan should expect to provide a few more documents than you did in your younger days. While the exact requirements may vary by lender, you will generally be asked to show additional proof of income, savings, and assets.
- Evidence that you have sufficient funds to pay up the deposit.
- Bank statements for up to 6 months showing money deposited from Centrelink
- A Centrelink income statement that confirms your pension and how much you receive
Talk to a broker
Getting the support of a mortgage broker is a good idea because brokers are used to finding lenders that will consider your circumstances. Brokers are typically in touch with and have access to a wide range of lenders. They can offer advice on the loan application process and help you prepare your loan application. And you don't need to pay the brokerage fee. It is paid by the lender, once the loan goes through.