Home loans for pensioners and retirees: what lenders count, and what they ask

Can pensioners get a home loan?

Yes, pensioners can get a home loan, and so can retirees living on super, rent or savings. There's no legal maximum age for borrowing in Australia. A lender decides on two things: whether the income it will count covers the repayments, and how the loan will be repaid if that income stops or before the term ends.

So the real question isn't "am I too old?" It's "which lender counts the income I actually have, and what plan to repay will it accept?" Lenders answer both differently, which is why this guide goes through them one at a time.

Is there a maximum age for a home loan in Australia?

No, there's no maximum age for a home loan in Australia. Lenders can't refuse you because of your age alone. A home loan at 60, 70 or older is assessed on the same footing as anyone's: your income, your debts, your living costs and the security.

What age changes is the length of the loan. A 30-year loan taken out at 65 runs well past the age most people stop work, so the lender will ask how it gets repaid in those later years. It may offer a shorter term instead (see shorter terms), or ask for an exit strategy (see what an exit strategy is).

What are lenders actually assessing when you're older?

Lenders assessing an older borrower are checking that you can repay the loan without hardship, now and later. For a pensioner or retiree that means two tests: whether your income covers the repayments today, and how the loan gets repaid if that income changes or before the end of a long term.

That's why an application can be declined when the borrower feels it was about age. The decision rests on the repayments and the plan to repay, and both can often be fixed with a shorter term, a bigger deposit, or a clear exit strategy.

What this means for you: a "no" from one lender is rarely the end of it. It usually means that lender didn't count enough of your income, or didn't accept your plan, and another lender's rules may land differently.

What does an exit strategy lenders accept look like?

An exit strategy a lender accepts is specific: it names what will repay the loan, roughly when, and what it's worth. A vague plan leaves the lender to guess, and a lender that has to guess usually says no.

What this means for you: before you apply, put a number beside your plan. If it's selling, what's the home worth and what would be left after the loan? If it's super, what's the balance and what else does it have to pay for? We ask for your latest super statement whenever super is part of the plan.

Do lenders count the Age Pension as income?

Yes, many lenders count the Age Pension as income, at least in part, but not all in the same way. Pepper Money's lending policy counts 100% of the Centrelink pensions it lists, though not rent, sickness or pharmaceutical allowances [1]. Other lenders count less, or won't use a pension as your main income.

Retirement income usually comes from more than one place, and lenders read each kind differently:

What this means for you: two retirees with the same income can get different answers simply because one lender counts all of their pension and another counts part of it. Which lender counts what is the main reason the right lender matters more here than for most borrowers.

Can you get a home loan on Centrelink payments?

Yes, a home loan on Centrelink payments is possible, but which payments count depends on the lender. Pepper Money's policy accepts 100% of the Centrelink pensions it lists, and counts Family Tax Benefit A and B, including Parenting Payments, in full. It doesn't use rent, sickness or pharmaceutical allowances [1].

Lenders that rely heavily on Centrelink income often limit how much of the property's value they'll lend and test repayments more strictly. So if most of your income is from Centrelink, a bigger deposit or a smaller loan can matter more than it would for a wage earner.

Can you get a home loan on a disability pension?

A home loan on a disability pension is assessed the same way as one on any other pension: does the lender count the payment, and does what it counts cover the repayments with room to spare? Pepper Money's policy names the Centrelink pensions it accepts [1], so whether yours is on that list is the first thing to check.

Lenders want income they expect to continue for the loan. A pension paid on an ongoing basis is easier to count than a payment with an end date, so bring the letter or statement that shows how your pension is paid.

Does super drawn as a pension count as income for a home loan?

Super drawn as an income stream, an account-based pension, can count as income for a home loan. Lenders look at whether the balance will last the loan, because an account-based pension runs down as you draw on it.

That's why super does two jobs in an application: it can be income, and it can be the exit strategy. The same dollars can't fully do both, so a lender will look at what the balance has to cover.

A pension paid for life from a government or defined-benefit scheme is a different thing: it's paid as income rather than drawn from a balance. How each lender counts it is something we check on your own statement, rather than assume.

Part-time or casual work alongside a pension

Part-time or casual work alongside a pension can count toward a home loan, usually with a history behind it. For casual pay, the lenders whose credit policy Money Brain has read each want time in the job before they count it, most often around 6 months [4]:

Permanent part-time pay counts as base pay. Westpac uses the lowest base rate and hours on your payslips, unless there's a reason they vary [4].

Starting a new job in retirement? At Westpac, a loan without mortgage insurance needs you to have started and received at least one pay. A mortgage-insured loan needs 3 months in the job, or less than that with 12 months in the same occupation and no gap of more than 2 months between jobs [4].

Rental and investment income in retirement

Rental and investment income is usually counted for a home loan in retirement, often at less than the full amount to allow for vacancies and costs. So $500 a week of rent won't usually be counted as the full $500.

For each rented property, we ask for the lease or the rental ledger from your managing agent, which shows the rent the lender will work from. For shares and other investments, bring your latest statements.

How much can a pensioner borrow?

How much a pensioner can borrow comes down to three things: what a lender counts of your income, your debts, and your living costs. Banks then check you could still make the repayments if rates were 3 percentage points higher, the buffer set by APRA, the banking regulator [2].

On a pension, the income side is usually smaller than a wage, so the buffer bites harder. That's why the same retiree can get quite different answers from two lenders: one that counts all of your pension and part of your rent can lend noticeably more than one that counts less of each. See how much can I borrow.

Shorter loan terms, and what they do to repayments

A lender may offer an older borrower a shorter loan term, so the loan ends while your income is still in place. A shorter term means higher repayments, because the same loan is repaid over fewer years. It can turn a loan that fits into one that doesn't, which is why the exit strategy and the term are worked out together.

Here's what the term does on a $300,000 loan, at an illustrative 6.0% rate, with the repayment a bank would test at 3 percentage points higher [2]:

These are illustrations, not quotes. Your rate depends on the lender and the loan.

What this means for you: halving the term from 30 to 15 years lifts the repayment by about $733 a month in this example, and the tested repayment rises to about $3,043. The interest saved is real, about $192,000 here, but the loan has to fit your income at the tested rate first.

Which lenders lend to pensioners and retirees?

Lenders that lend to pensioners and retirees differ less on whether they'll lend and more on what they count: how much of a pension, how much of super, how much of rent, and what exit plan they'll accept. Pepper Money is the one lender whose pension rule we print here [1].

We don't print a list of lenders by age. Each lender's rules on age, term and retirement income are set in its own policy, and we only publish a rule once we've read it there, with the date. Until then it's a question we check for you, lender by lender, before anything goes in.

Can a pensioner refinance a home loan?

Yes, a pensioner can refinance, but a refinance is a new application, assessed on the income you have today. A loan you took out while working was approved on that pay; a new lender will look at your pension, super and other income now, and at how the loan gets repaid.

So before you switch for a lower rate, check the new lender will count enough of your income. If it won't, staying put and asking your current lender for a better rate may be the better move. See refinancing a home loan and the home loan health check.

Downsizing instead of borrowing

Downsizing can mean you borrow little or nothing: you sell the family home, buy something smaller, and the sale pays for most or all of the next one. For many retirees it's the route where nobody borrows anything at all.

Where you'd need a loan, it's usually because the timing doesn't line up: you've found the next home before the old one sells. That's what bridging is for (below).

Stamp duty is part of the sum. Tasmania, for one, has a duty concession for pensioners who downsize [5]. Check your own state's revenue office before you price the move, and see the stamp duty calculator.

Buying before you sell: bridging finance in retirement

Bridging finance lets you buy the next home before you've sold the current one, and it can suit someone downsizing, where the sale clears most or all of the debt. Firstmac's policy sets out its bridging loan in full [3]:

Firstmac also works out the debt you'd be left with as if the home you're selling fetches 20% less than its value, and that end debt can be no more than 80% of the property's value [3]. The new home must be the one you'll live in, the old one must be listed for sale before the purchase settles, and Firstmac bridges only in the postcodes its policy lists as Category 1a and 1b [3].

What this means for you: on a pension, the 6-month bridge is the one with no repayment test during the bridge. A 12-month bridge feels safer, but it adds a test on the peak debt that your income has to pass. If the sale leaves no end debt, the loan simply ends with the bridge. See bridging finance.

Can a pensioner be a guarantor for their children?

A pensioner can be a guarantor for a child's home loan at some lenders, but lenders differ: some accept a retired or pensioner guarantor with extra advice, and others decline. The question a lender asks is whether the guarantor could pay the guaranteed amount if they had to.

On a pension that's a harder test to pass, and the guarantee ties up your own home while it runs. Ask before you plan around it. See guarantor home loans.

One of you retired, one still working

When one partner is retired and the other still works, both incomes can count toward the loan. What the lender will ask is what happens when the working partner stops, so the exit strategy and the term are set around that date, not just around today's pay.

If the working partner is casual, check the lender's rule first: at ANZ, on a loan with LMI, a casual can't be the only or main earner [4].

What does a broker cost you?

How a broker is paid, and the rule Money Brain holds against it, is set out in full on its own page: what a mortgage broker costs.

Your first move

You've read how lenders think about older borrowers. Now there's one question left: which lender counts your income, and accepts your plan to repay, at the loan you want? That depends on your pension, your super, your other income and your timing, and it's what Money Brain works out before anything goes to a lender.

When you're ready, the closing section below is the simplest way to start.