How to get a home loan if you're a pensioner
With the population seemingly living longer than ever, retirement age creeping upwards, and parents wanting to help children get onto the property ladder, more and more over 60s are interested in finding out what their options are for a home loan.
While some lenders view pensioners as high-risk customers, there are many lenders out there who are willing to provide home loans or mortgages to people over 60 – some even let you apply until you are 75! So, don’t let your age be a barrier if you are looking to buy your own property later in life, or if you want to use some of the equity that you have built up in your home.
Here, we have answered some common questions for you:
What should I keep in mind?
People with a pension must keep in mind that their income may limit the level of loan they can apply for. This is because many lenders look at the level of income as an important factor in the amount of money they will lend. For this reason, pensioners will probably be better off speaking to a broker who can assist them in getting the right loan from a lender, rather than trying to apply for a loan online, as you may not be able to demonstrate your ability to repay the loan amount.
Looking for a mortgage broker? As one of Australia’s largest independently owned non-bank lenders, Mortgage House offers a vast range of loan and mortgage finance options.
What types of loans are available to me?
- Variable rate loans: If you take out a variable rate loan, one of the most common loan options in Australia, your interest rate will be based on interest rate fluctuations. This means it is subject to change during the life of your mortgage, and while it offers flexibility and possible savings, a rise in the interest rate can mean more of your pension has to be spent on repaying the loan.
- Fixed rate loans: If you take out a fixed rate loan, the interest rate for your loan will be determined at the outset, often for the whole of the term of your loan, although there are hybrid options available where you fix the rate for a period of years with a possibility to change later. This means you will always know in advance what your repayments will be, allowing you to budget more easily.
- Reverse mortgages: This type of loan allows you to borrow using the equity in your home as security. You can receive a lump sum, get regular monthly payments, a line of credit (a pre-approved amount that you can withdraw as required) or a mixture of these options. As you don’t need to show any income to qualify for a reverse mortgage, expect the interest rate to be higher. Other conditions apply, including the fact that you must repay the loan when you sell your home, go into care or pass away.
What if I receive a disability pension or veteran’s pension?
These types of pensions are usually considered to be a valid form of income by lenders. Keep in mind that you may have to provide proof of income, such as bank statements, letters from the relevant authority, or other documentation. Your broker can assist you with these and other possible eligibility requirements that you may need as a pensioner.