Under the Age Discrimination Act, lenders are not allowed to reject a home loan application just 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.
Mortgage rules for older borrowers
ASIC requirements
The Age Discrimination Act makes an exemption for credit. While lenders can’t reject someone just because of their age, they are allowed to take a borrowers age into account. Home loan applicants who are over 50 years old may need to demonstrate an ‘exit strategy’, or a plan that shows they can repay the loan despite their upcoming retirement. ASIC guidance prevents 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. A home loan may be deemed unsuitable if the borrower will not have enough income post retirement, or if it looks likely that the borrower will need to sell their home to pay the loan off.
Lender requirements
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.
Post retirement income
Most lenders can consider government payments as assessable income on a home loan application. If you’re receiving an aged pension or disability benefits, you can use them as evidence that you will be able to pay off your home loan. Superannuation income can also be included.
The table below features some of the top owner occupied home loans on the market.
Top owner occupied home loans
The table below features home loans with some of the lowest interest rates on the market for owner occupiers.
| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Additional Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
6.04% p.a. | 6.06% p.a. | $3,011 | Principal & Interest | Variable | $0 | $530 | 90% | 4.6 STAR CUSTOMER RATINGS |
| Promoted | Disclosure | |||||||||
5.99% p.a. | 5.90% p.a. | $2,995 | Principal & Interest | Variable | $0 | $0 | 80% |
| Disclosure | |||||||||||
6.14% p.a. | 6.16% p.a. | $3,043 | Principal & Interest | Variable | $0 | $350 | 60% |
Home loans for over 50s
Aussies over 50 in the market for a home loan shouldn’t be discouraged. Lenders do want your business after all, and just need to be satisfied there are not likely to be any problems with paying the loan back. As long as you can demonstrate this, it likely doesn’t matter how old you are.
Exit strategies
Even if a lender has extra credit checks for older borrowers, the loan can still be approved providing the borrower can demonstrate a suitable exit strategy. This is basically an assurance to the lender that the loan can be paid off before retirement, or that the borrower will have sufficient income post retirement to keep making repayments.
Examples of possible exit strategies include:
- Selling assets. If buying an investment property, this could include selling the property itself.
- Income or payout from superannuation
- Downsize the property if it is realistic that this will be possible
- Per ASIC, if this is the exit strategy, the borrower needs to know and understand this at the time the loan is taken out.
- Investment or other income that will continue into retirement
Specialist home loans for seniors
Seniors First
Seniors First is a mortgage broker that specialises 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.
Boomer Home Loans
In 2022, a FinTech called Boomer Home Loans was launched, the first lender exclusively offering loans to over 55s. There were several products on offer, including the ‘Boomer Clear’, which was designed to help over 55s pay their mortgage off before retirement. However, Boomer Home Loans went into administration after just three months.
Home loans for seniors
There are 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 use a reverse mortgage loan 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. There are no repayments, but the loan accrues 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.
Per the National Credit Act, these loans are usually capped at an LVR of 15%, plus 1% for every year the borrower is older than 55. For example, a 55-year-old might only be able to borrow up to 15% of the value of the property, while a 65-year-old might be able to take out up to 30% of their home value.
Reverse mortgages are supposed to have a ‘no negative equity guarantee’ per the National Credit Code, which means the borrower can never owe more than the market value of the secured property when it is sold.
Home Equity Access Scheme
The 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 offered by the government. As of April 2024, interest rates are 3.95% p.a and there is a no negative equity guarantee.
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 bankrupt or insolvent.
- Adequate insurance covers the securitised house (at least 90% of the building value should be covered).
Collections: Buying a home Reverse Mortgage
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