Retirement Age Home Loan

In Australia, there is no maximum age limit for seeking approval for a home loan. The Age Discrimination Act protects older borrowers from being discriminated against based on their age, meaning lenders cannot outright reject applications solely due to age.

While borrowers over 50 might encounter additional hurdles when applying for a home loan, understanding lender expectations and preparing adequately can improve the chances of approval.

Retirement Age Borrowing Power Calculator

Enter your details below and discover whether your exit strategy for a home loan will be acceptable to the bank.

How to get a home loan if you're over 50

The secret to getting approved is to apply with a lender that has flexible policies. Following these three golden tips if you’re 50 years or older:

• You must have a defined exit strategy.
• You must repay the loan prior to retirement.
• You should apply with a lender that understands and accepts mature age borrowers.

How Lenders Assess Older Borrowers

Banks require proof that you can repay the loan without hardship. If the loan term extends past your likely retirement age, then the bank has not met their responsible lending obligations under the National Consumer Credit Protection Act (NCCP). However, the NCCP Act is open to interpretation! For this reason, each bank has their own requirements and rules for older borrowers. Many of the common policies include:

Maximum Age and Retirement Plans:

Lenders assess your current age, expected retirement age, and remaining working years.
Most Australians retire between 60 and 67, and lenders may assume you’ll retire around this age unless proven otherwise.

Repayment Strategy After Retirement:

Lenders require a clear plan on how you’ll manage repayments post-retirement. This includes:

• Superannuation: How much you have and whether it can sustain repayments.
• Investments: Rental income, shares, or other assets generating income.
• Downsizing: If you plan to sell your current home and use the proceeds to pay off the loan.
• Age Pension: Lenders often view this as insufficient on its own for loan repayments.

Income Documentation:

• Employed borrowers need to provide proof of income (e.g., payslips).
• Retired borrowers must show income from superannuation, rental properties, dividends, or pension payments.

Loan-to-Value Ratio (LVR):

Lenders may require a lower LVR for older borrowers (e.g., 70%-80%) to reduce their risk. This means you might need a larger deposit.

Living Expenses and Buffer:

Lenders will calculate your post-retirement living expenses and ensure you have enough income or savings to meet these in addition to loan repayments.

Retirement age rules

Different banks have different policies for borrowers that are nearing the age of retirement:

• 35 years old: Lenders will consider your profession and likely retirement age and they may shorten your loan term.
• 45 years old: You may be required to show superannuation statements or demonstrate that you have an exit strategy in place to repay the loan when you retire. This is particularly true if you’re retiring within the loan term.
• 50 years old: Most lenders will allow you to borrow but some may decline your application due to your age.
• 55 years old: Almost all lenders will require a written exit strategy, evidence of your superannuation and other assets that can be sold to repay the proposed debt.
• 60 years old: Most banks are likely to decline your application due to your age. However, if you’ve got a continuing source of income past retirement, or have assets you can sell to help repay the loan, then your loan may be approved.
• You will be over 75 before the end of the loan term: You will require an exit strategy.
• 65 / 75 / 80 years old: You’ll only be able to borrow money with either a seniors equity loan (reverse mortgage) or with a standard loan, if you can prove an ongoing post-retirement income.

What Exit Strategies Are Accepted?

The exit strategy that you provide to the lender can vary depending on your asset position, income and retirement plans.

Common strategies include:

• Downsizing to a smaller home when you reach retirement (not accepted by all lenders).
• The sale of assets such as an investment property or shares.
• Lump sum repayments from superannuation.
• Ongoing income from superannuation.
• Selling property and using the proceeds to repay the outstanding balance when you retire.
• Early repayment of the loan (shorter loan term)

An Example

• Borrower: Age 55, Wants a $400,000 Loan
• Retirement Plan: Plans to retire at 65.
• Superannuation Balance: $500,000.

How the lender will assess the borrower

• Loan term is limited to 10 years.
• Monthly repayments calculated to ensure the loan is repaid by age 65.
• Borrower must show that superannuation can cover repayments post-retirement.