Home loans on pensions - age & disability

Here are some of the home loan options available to you if you are receiving an age pension or disability pension and looking to apply for a mortgage.

Whilst it can be difficult to receive a home loan as a pensioner due to being considered risky by lenders, it is still possible to get a mortgage despite the challenges involved. If you are on a pension or applying for a home loan at an older age, you may be limited in the amount of funds you can borrow, this is due to a higher risk being associated by lenders when processing the loan application.

Types of home loans for pensioners

If you are receiving an age pension you may be able to get a mortgage by applying for a reverse mortgage. A reverse mortgage involves using the existing equity in your home to act as security for a new loan. This type of loan is suitable for pensioners as it does not rely on a regular income stream to be funded. 

The flexibility of a reverse mortgage is valuable to borrowers on an age pension as they can elect to take the loan out as a lump sum payment, an income stream or a line of credit. Similar to a normal home loan, you will accrue interest on your outstanding funds, although with a reverse mortgage you will not have to make regular repayments as interest and fees will be added to the loan amount each month and that compounds interest. Reverse mortgages are therefore usually paid in full in the following circumstances: the house is sold, applicants pass away or move into aged care facilities. Understand how your reverse mortgage could work by using our calculator here.

It is important to understand that a reverse mortgage can be beneficial as an additional source of cash in retirement, however it will only be available to you if you already have a property with available equity. Download our factsheet for answers to the frequently asked questions surrounding reverse mortgages here

A line of credit loan works similar to a reverse mortgage as it revolves around available equity in your property by providing you with access to the funds when needed. A line of credit will have a pre-arranged limit of funds that can be drawn upon and this can be drawn out all at once or spread out over time. Unlike a reverse mortgage, a line of credit home loan will require an interest-only payment to be made as the minimum amount each month. 

Similar to a reverse mortgage, a line of credit home loan is an available option for a pensioner looking to get a home loan to obtain extra funds, however, will require you to own a property with available equity to access prior to taking out the loan. The risks to be aware of associated with a line of credit are that they usually incur a higher interest rate and can be very costly if the balance of a line of credit is not regularly reduced. 

While the options of a reverse mortgage and line of credit loan are suitable home loans for pensioners with an existing property, if you receive an age pension you can still be eligible to receive an investment home loan.  

An investment loan can be a viable option for pensioners looking to purchase a property as lenders will take the rental income that you would make on the property into account when accessing your application. The rental income you then receive from the investment property can be used to cover the mortgage repayments and provide an additional source of income in your retirement if the property is being positively geared

Use our free home loan quick quote to understand what your potential borrowing power could be for an investment loan. 

Whilst this solution can assist you in getting your home loan, please be aware income earned from your investment property can affect your pension or any other government entitlements. You can contact the Department of Human Services (Centrelink) on 132 300 to talk to a Financial Information Service Officer about how your pension may be affected. 

Disability pension home loans

It is important to note that in most cases lenders may consider a disability pension to be genuine income and therefore can treat the application similar to getting any other home loan. 

As many lenders accept the disability pension as an accepted form of income, it must be verified as part of your home loan application. This can be done by providing bank statements and a letter from the relevant government department confirming your pension benefit payments and frequency amount. 

Therefore you can get a home loan on a disability pension, your eligibility will be dependent on the amount of income you receive and expenses you have. To further understand what your borrowing power could be to buy a house with your disability pension you can use our free home loan quick quote to calculate the amount today! 

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