Home Loans for Seniors and Retirees: A Guide

Older borrowers can find it harder to get a home loan if they will reach retirement age before the end of the mortgage term, particularly if they don’t have a dedicated plan to repay the debt before their golden years.

Under anti-discrimination laws, lenders generally can’t reject a home loan application solely because the borrower is too old. However, age can be taken into account when assessing a borrower’s future financial position, which can make it challenging for some older Australians to be approved for a mortgage.

But Aussies over 50 in the market for a home loan shouldn’t be discouraged. Lenders do want your business after all, most just need to be satisfied that you likely won’t have any problems paying the loan back. As long as you can demonstrate this, it likely doesn’t matter how old you are.

Can older Australians take out a mortgage?

While lenders can’t reject someone just because of their age, the Age Discrimination Act makes an exemption when it comes to providing credit. Lenders are not only allowed to take a borrower’s age into account when assessing mortgage applications – there are situations that not considering a person’s age could be deemed irresponsible.

Responsible lending laws prevent lenders from issuing loans if it is ‘likely’ that the borrower would be unable to meet their obligations during the loan term. This has typically been applied to borrowers who will hit retirement age before the mortgage term concludes.

Thus, home loan applicants over 50 years of age may need to demonstrate an ‘exit strategy’ – a plan detailing how they will repay the loan ahead of or during their assumed retirement. If an older Australian can repay the loan within a shorter timeframe, sell other assets to repay the debt, or prove they’ll have enough income to meet repayments during retirement, they’re probably able to take out a home loan.

A home loan may be deemed unsuitable if the borrower will not have enough income post retirement or if it appears likely they’d need to sell their home to pay the loan off.

Do all lenders offer home loans to older or senior Australians?

Different lenders have different thresholds for when an exit strategy is necessary. Some lenders might need one any time the borrower will reach retirement age during the loan term while others might only need one for borrowers who are above a certain age when they apply.

These are some examples of what some lenders have disclosed about how older borrowers are assessed:

Westpac

In 2017, Westpac said there were three scenarios where home loan applicants would be asked about retirement:

• The applicant is over 55 years old.
• The applicant will turn 75 before the end of the loan term.
• The applicant otherwise informs Westpac they plan to retire within the foreseeable future.

Macquarie

Home loan applicants with Macquarie who will be 70 or older when the loan matures need to show a satisfactory exit strategy.

Do home loan lenders consider the Age Pension or super as income?

Most lenders can consider government payments as assessable income on a home loan application. Here’s a brief breakdown of what a lender might consider income when assessing an older Australian’s home loan application:

• Age Pension
• Disability benefits
• Income streams from superannuation
• Income from investment properties
• Dividends
• Annuities 
• Most other forms of income

Top owner occupied home loans

The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

What is a home loan exit strategy?

Even if an older mortgage applicant wouldn’t be able to meet their repayments if they were to retire, the loan can still be approved providing they can demonstrate a suitable exit strategy. An exit strategy is basically an assurance to the lender that the loan can be paid off before or at the point of retirement.

Examples of possible exit strategies include:

• Selling assets
  If you’re buying an investment property, your exit strategy could include selling the property itself.
• Income or a payout from superannuation
  You might plan to dip into your superannuation once you reach retirement age to pay the mortgage off 
• Downsizing
  You might plan to downsize to a smaller, more affordable house or unit once you retire

Specialist home loans for seniors

Seniors First

Seniors First is a mortgage broker specialising in helping older Australians. Although predominantly a broker for reverse mortgages, Seniors First also offers assistance to over 55s who are looking to take out a traditional home loan.

Other financial products available to older Australians

There are also a couple of loan products exclusively available to borrowers above a certain age. For older Aussies who want to buy a new property, these options could be a helpful cash injection towards buying property outright or as a deposit.

Reverse mortgage

Older people who already own their home might be able to borrow via a reverse mortgage, using the resulting funds as a deposit on another property. A reverse mortgage allows older people to borrow against the equity in their home, and is typically reserved for those over 60.

Reverse mortgages don’t demand repayments, but the loan does accrue interest and is repaid in full once the home is sold. Some reverse mortgages allow the borrower to choose between lump sum payments or a regular income stream.

Home Equity Access Scheme

The Australian Government offers another alternative for pension aged Australians who already have equity in Australian real estate. The Home Equity Access Scheme is essentially a reverse mortgage. These loans can be paid as a lump sum, which could go towards a deposit to buy a new property.

To be eligible, you’ll need to meet the following criteria:

• You or your partner are pension aged, and eligible for a qualifying pension
• You or your partner own Australian real estate you can use as security for the loan
• You, your partner or any co-owner of the property is not bankrupt or insolvent
• Adequate insurance covers the securitised house (at least 90% of the building value should be covered)