Pensioners are often overlooked when it comes to home loans because traditional lenders consider them as a high risk. This is often attributed to a pensioner’s age and to them having a fixed income.
A pensioner’s age typically raises concern for a traditional lender as home loan terms are 20 to 30-years in duration and an older borrower has a limited life expectancy. Therefore, if the person passes away before the home loan is paid out, then the lender may not be able to recuperate the full amount they are owed.
A pensioner’s fixed income, on the other hand, can limit payment flexibility when it comes to variable interest rates and rises in these rates. Increases in rates can cause financial hardship, especially for a pensioner who is unable to increase their income to cover added expenses.
Having said this though, there are home loan financing options available for pensioners, these are just not with traditional lenders. Let’s look at what options are available.
There are government assisted home loan schemes for pensioners and home loan options with non-traditional lenders, also known as non-conforming lenders. Government assisted home loan schemes vary from state-to-state and eligibility typically depends on income thresholds and the type of pension that an individual receives, whereas non-traditional lenders offer low-doc loans where you need little documentation, such as tax assessments to secure a loan. However, both government and non-traditional home loan providers will require you to prove that you are credit worthy and financially stable, and that you can meet your repayments without any financial hardship.
There are a number of government assisted home loan programs on offer for individuals who are looking to buy a home. To be eligible for these schemes you must have a good credit or rental history, owe no money to the government and meet lending criteria, as well as be able to make repayments. Some schemes currently on offer are as follows:
Australian Wide – First Home Buyer Grant
Northern Territory – HomeBuild Access
Queensland – Queensland Housing Finance
South Australia – Home Start
Western Australia – Key Start
To find out if your state government has a pensioner home loan scheme, contact your local council or state government office.
Pensioner home loans that are offered by non-traditional lenders are similar to those offered by traditional lenders in that there are a variety of home loan products on offer. This means that you’ll be able to select a rate type, such as fixed, variable or split, and that you can select home loan features, such as loan redraw and an offset account, if needed.
However, before taking out a loan with a non-traditional lender, you need to be mindful that these lenders typically charge you a higher interest rate as you are considered a higher lending risk. But, in saying this, some non-traditional lenders do review your interest rate annually, and if you have developed a strong repayment history they may even consider reducing your rate of interest.
Do you want to know more about pensioner home loans? If you said yes, then contact eChoice today and find the right home loan for YOU.