How to get a home loan if you’re a pensioner

Home loans for pensioners

Don’t let your age get in the way of purchasing your own home. Here are some tips to help get you started.

Even though some lenders view pensioners as being high-risk borrowers, there are still lenders willing to offer home loans to individuals receiving pension benefits. Read on to learn more about what options are available.

Considerations when applying for a home loan on a pension

Pensioners applying for home loans must keep in mind that their income and financial position might limit their success in getting a home loan. This is mainly because the pension is lower than the normal income of other applicants who are applying and the income level required. If you have assets and believe you can meet lending requirements, it might be a good idea to discuss your position in person with your financial provider or mortgage broker, as applying online may be difficult if you can’t demonstrate your capacity to repay the loan.

Need home loan help? Find a mortgage broker to help you

What types of home loans might be available to pensioners?

  • Reverse mortgages. A reverse mortgage allows you to borrow funds using equity from your home as security for the loan. A reverse mortgage can either be paid as a lump sum, a regular stream of income, a line of credit or a combination of these. No income is needed to qualify and for this reason, the interest rate tends to be higher. You must repay the sum of borrowed money when you sell your home, pass away or move into aged care.
  • Variable rate loans. Variable rate loans are a common loan choice in Australia. With a variable rate loan, your interest rate is subject-to-change based on interest rate fluctuations. For example, when interest rates are low, the interest rate on your loan should also be low, allowing you flexibility and possible cost savings.
  • Fixed rate loans. A fixed rate loan is more secure than a variable rate loan. With a fixed loan, the interest rate for your loan will be set upfront and you commit to this rate for the entirety of your loan. This means you avoid any possible fluctuations in interest rates and you also know your repayments upfront. This kind of loan takes the stress away from worrying about interest rate changes.
  • Line of credit loans. A line of credit is a funding line which uses the equity in your home. It’s an approved amount that you can use a bit at a time or all at once. You loan is approved against a security and you can draw on this loan amount at any time. You only pay the interest on the amount that you use. For example, if you get a line of credit of $200,000 and only use $50,000, you only pay interest on the $50,000. These are good for those who are unsure if they need the full value of a loan.

How to compare home loans

  • Interest rates. Interest rates are one of the most important elements to compare as interest is the biggest expense for home loans. For pensioners, it’s important to look for the lowest interest rate because this is what will help you save money.
  • Home loan flexibility. It’s important for your home loan to provide you with flexibility. This may be flexibility in repayment schedules, flexibility in making additional repayments and redraw facilities. Compare each loan and see what flexibility it can offer you.
  • Eligibility requirements. Some home loans will require you to meet certain eligibilities in order to take out that home loan. This may include a regular source of income, a good credit history and more. Pensioners in particular should compare the eligibility requirements of home loans because some may be more appropriate to apply for than others.
  • Fees and charges. Most home loans have mandatory fees and charges that you may have to pay. Compare any potential fees and charges each loan has - these may be either upfront fees or ongoing fees - and select an option with lower fees to help save money.
  • Loan term. Each home loan provided by financial lenders will have different loan lengths. Compare and select the home loan that provides you with the loan length to meet your needs.

Am I eligible for a home loan if I'm on a disability pension?

Generally, a disability pension is considered a valid form of income by most lenders. Therefore a home loan application for someone on a disability pension is not treated any differently from an application where someone services their loan with other forms of income.

Like any applicant for a home loan, the lender will review whether the amount of income support you receive is sufficient for you to comfortably repay the loan.

Most lenders will review your application on a case-by-case basis. Your eligibility for a home loan will depend on the amount of income you receive and how much of this can be used to service a loan.

Other factors including your age, assets and debts will be assessed by a lender on an individual basis.

Each lender will have different eligibility criteria, so it’s best to speak directly with your mortgage broker or lender to determine whether a home loan is suitable for you.

Extra documentation for disability pensioners

Among other eligibility criteria required by the lender, you’ll generally need to provide the following:

  • Evidence of funds to complete the deposit.
  • Bank statements showing Centrelink benefits being paid into your bank account (i.e. some lenders require 6 months of recent bank statements).
  • Letter from Centrelink confirming the status and nature of your disability pension.

Am I eligible to receive a home loan if I receive the Veteran's Pension?

Many lenders may accept a Veteran's Pension as a source of income for a home loan. This applies if you are receiving:

  • Department of Veterans' Affairs War Widows or Widows Pension
  • Department of Veterans' Affairs Service Pension
  • Department of Veterans' Affairs Age Pension

Additionally, lenders may accept the Department of Veterans' Affairs Incapacity Pension as a source of income.

In order to demonstrate your pension as a source of income for a home loan application, you'll need either a current bank statement showing your pension payment, or a current Department of Veterans' Affairs statement.

Pros and cons of home loans available to pensioners

Pros

  • Gives you funds when you need it. These home loans allow pensioners to enter the property market and give you the funds you need, when you need them.
  • Extra benefits. Some home loans available to pensioners come with extra benefits such as low or no interest rates, flexible payment plans and advance payments.
  • No proof of income required for reverse mortgages. With reverse mortgages, no proof of income is required. It’s important to note that other home loans will require proof of income unless it’s a low doc loan.

Cons

  • Higher interest rate. Reverse mortgages tend to have higher interest rates compared to other home loans.
  • Eligibilities. Some home loans have specific eligibility requirements you must meet that may be quite stringent.

Frequently asked questions about home loans available to pensioners

A home loan is when an advance of money is provided to a borrower from a lender when they want to purchase their own home or land to build their home. The lender will give you the money you need to purchase your house or make improvements. Home loans are primarily for those who want to enter the property market but do not have the full property value saved up. Home loans are best suited to anyone who has a good credit history and wants to purchase a house but does not have all the funds required.

When you want to purchase a home but don’t have the full amount of the funds that you need to purchase, then you should apply for a home loan. Typically, you apply for a home loan if you meet the eligibilities of each financial lender. With most home loans, you are required to pay a deposit. Typical deposits tend to be around 20%, but in some circumstances, your deposit can be as small as 5%. The lender will give you the money you need to purchase your home and you are liable to pay the loan back within a certain amount of time, as well as interest on the loan and any additional fees.

Yes, pensioners can still apply for regular home loans that aren’t specific home loans for pensioners but you should keep in mind you may not be successful if you don’t meet eligibility or income requirements.

Any other forms of income you may receive, your previous credit history, and any other assets that may be in your name can be used to boost your home loan application. Usually your pension is taken in account if it is taxable.

Generally, a person on a disability pension will need to come up with a 20% deposit. This is because there is no other salary or other source of income that can be used to service the loan- there is little security should you default on your loan.

Again, this criteria varies from lender to lender.

If take out a mortgage with a co-borrower, generally your ability to meet your repayments is increased so the lender will view you as being a less risky borrower. In this case, your application may have a greater chance of being approved.

Some lenders may only accept your application if your co-borrower is working. For instance, some lenders will assist you if you’re buying a new home together with your son or daughter. However, some banks may not be able to help you if you're borrowing on your own.

Marc Terrano

A passionate publisher who loves to tell a story. Learning and teaching personal finance is his main lot at finder.com.au. Talk to him to find out more about home loans.

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94 Responses

  1. Default Gravatar
    RayOctober 9, 2017

    I’m 69 years old, on an aged pension, married, House valued at $495000, present mortgage $52000. Wish to increase to $65000, but not reverse mortgage. Can anyone help ?

    • Staff
      HaroldOctober 9, 2017Staff

      Hi Ray,

      Thank you for your inquiry.

      Regarding this matter may want to consult to a mortgage broker before moving forward.

      I hope this information has helped.

      Cheers,
      Harold

  2. Default Gravatar
    StuartSeptember 22, 2017

    I currently own (no mortgage, value $1m) a property together with my sister which is too large and we were wondering if we could take out a mortgage on our existing property of $500,000 and buy a smaller property with this money and rent out our existing property for $750 per week. We are both pensioners with a current joint income of $850 per week. Would lending institutions allow us to take out such a mortgage?

    • Staff
      RenchSeptember 24, 2017Staff

      Hi Stuart,

      Thanks for your inquiry. Please note that we are not affiliated with any company we feature on our site and so we can only offer you general advice.

      I suggest speaking to a Mortgage Broker directly for advice. You may go to this page for helpful info and compare your options. Please click on the ‘Speak to Mortgage Broker’ tab and fill out the form to get assistance.

      Best regards,
      Rench

  3. Default Gravatar
    AnaSeptember 18, 2017

    Hello, my parents are pensioners & have a deposit for a unit! What banks or lenders out there would take their Centrelink payment into account! Thank you for your help.

    • Staff
      JoanneSeptember 18, 2017Staff

      Hi Ana,

      Thanks for reaching out.
      To guide you and give you more information about loans available for centrelink recipients, it would help if you read this page first.
      Alternatively, you can speak to a mortgage broker who can look into your parents’ circumstance and offer a range of home loan products for them.

      Cheers,
      Joanne

  4. Default Gravatar
    LuisaSeptember 7, 2017

    Enquiring about a loan

    • Staff
      GruSeptember 8, 2017Staff

      Hello Luisa,

      If you are inquiring about home loans that are available to pensioners, I see you are on the right.

      To assist you further, I would like to gain clarification on your home loan requirements.
      Information such as loan amount, years to pay, are a good way to start.

      Hope to hear from you again soon.

      Cheers,
      Gru

  5. Default Gravatar
    nicoleSeptember 5, 2017

    Im on TAC and return to work on light duties as well as i get topped up by centrelink for carers payment and allowance. I have a nice size deposit and after a mortgage but finding it hard while im on TAc as they wont take that income into account. who could i go with to get the mortgage?

    • Staff
      DanielleSeptember 6, 2017Staff

      Hi Nicole,

      Thank you for contacting finder. We are a comparison website and general information service, we’re more than happy to offer general advice.

      You may refer to this page for options that may suit your needs. You may review and compare the offers available on the table or on the list. Once you have selected one, you may proceed by clicking the green “Go to Site” button.

      I hope this helps.

      Cheers,
      Danielle

  6. Default Gravatar
    joeAugust 29, 2017

    Hi there I would like to know if is there any Banks that can help as to get a home loan.I’m a 50 year old man who has a disability pension,and I live with my wife who is a career to our daughter who also has a disability pansion.I think this means that we all together have 3 stable incomes,for the last 8 years we have been paying the rent to a real estate agency which is right now $ 700 a week.I would like to know if is there any way to get a home loan on our 3 combined incomes.

    • Staff
      DanielleAugust 30, 2017Staff

      Hi Joe,

      Thank you for contacting finder. We are a comparison website and general information service, we’re more than happy to offer general advice.

      You are on the right page. You may review and compare the offers available at the bottom of the page. Once you have selected one, you may proceed by clicking the orange “More Info” button.

      I hope this helps.

      Cheers,
      Danielle

  7. Default Gravatar
    JuanitaJuly 23, 2017

    We are a couple over 50 both employed with good paying jobs. We are renting and would like to purchase a home together. We can afford about 20000 deposit and want to borrow 350000. We have been told we need at least 50 to 80k deposit. Please advise

    • Staff
      RenchJuly 24, 2017Staff

      Hi Juanita,

      Thanks for reaching out to us.

      If you are looking for a home loan and on a pension, you can check this page for helpful info and where you can compare your options. You may click on your preferred loan to see more details then you can click on ‘Go to Site’ button to submit an online application.

      Before applying for any loan, please ensure that you meet the eligibility criteria and requirements of the loan option or lender and make sure to read the details, as well as the relevant PDS/ T&Cs of the loan option before making a decision and consider whether the product or option is right for you.

      Cheers,
      Rench

  8. Default Gravatar
    PatriciaJune 27, 2017

    Can I use the house I want to buy as collateral for a loan also how much deposit would I need for a 250,000 dollar loan I am on a disability pension?

    • Staff
      JonathanJune 27, 2017Staff

      Hi Patricia!

      Some lenders may allow you to use the property you intend to buy as a collateral and will just hold on the deed until it is paid off. As for the deposit, usually they require 20% of the loan value and this varies per lender.

      Please consult with your lender of choice to know exactly the requirements and deposit required.

      All the best!

      Cheers,
      Jonathan

  9. Default Gravatar
    RosemaryJune 7, 2017

    Hi! I was wondering if I’m able to obtain a loan from your company. I’m waiting for my paperwork to go through Centrelink for single parenting payments and disability.

    • Staff
      JonathanJune 7, 2017Staff

      Hi Rosemary!

      Thanks for the comment.

      You may check our comparison table for lenders on this page for personal loans and a guide for home loans.

      Click “Go to Site” green button to proceed with your application.

      Hope this helps.

      Cheers,
      Jonathan

  10. Default Gravatar
    MaritessJanuary 4, 2017

    I just want to know if i can borrow personal loan payable in 3 yrs ty

    • Staff
      AnndyJanuary 4, 2017Staff

      Hi Maritess,

      Thanks for reaching out.

      We feature a number of personal loan products on this page with a repayment period of 3 years or more.

      Before you apply, you may want to check first your credit score for free through this page to help in identifying your possible options.

      Cheers,
      Anndy

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