- 15 Sep, 2017

How to Get a Home Loan If You’re a Pensioner

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While a pensioner is a high-risk borrower for a lender, many loan options are still available. However, finding the right home loan may take a little time and effort when on a pension. Why? Well, you need to consider your circumstances and which options are the best for you.

Pension Home Loan Considerations

Before applying for a home loan as a pensioner you need to consider your financial position. You’ll also need to review your circumstances such as future goals, assets and pension type. Plus, it’s recommended that you weigh-up the pros and cons, before considering a loan.

If you have assets and feel you meet lending requirements, then it’s time to discuss options with a lender. Also, you may wish to contact a mortgage broker as they help you compare loan options.

What Mortgages are Available to Pensioners?

There are a few home loan options on offer to pensioners. These include the reverse mortgage, variable or fixed rate home loan and the line of credit loan. Let’s look at these in greater detail.

  • Reverse mortgage – This type of home loan allows you to access the equity in a property to secure a loan. Reverse mortgages are available as a lump sum, regular income stream or line of credit. Plus, the repayment of the loan’s value occurs at the time of property sale. As a result, you need no income to secure this type of loan.
  • Variable rate home loan – A common choice for Australians, the variable rate loan’s interest adjusts with the market rate. Thus, when the market rate is low, so too is this loan’s interest rate. To be eligible for this loan, you will need to have an income that meets lending requirements.
  • Fixed rate mortgage – The fixed rate loan gives you more security as the interest rate stays the same for a fixed term. Subsequently, you’ll know exactly how much you’ll need to repay monthly on your loan. However, this loan is like the variable rate loan in that you’ll need to meet lending criterion and make regular repayments.
  • Line of credit loan –  A line of credit loan is a funding line that uses property equity. Your loan approval is for a specified amount and you can draw on this when and where needed. You’ll then only pay interest on the amount used. For instance, if you have a line of credit for $150,000, but use only $25,000. Then, you’ll only pay interest on the $25,000.
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How Do I Compare Home Loans?

There are five important aspects to look for when you compare loans. These are interest rates, flexibility, eligibility, charges and terms. These are as follows:

  • Interest rates – The lower your rate of interest, the less your loan will cost you. So, look for the lowest rate possible, as this allows you to save more.
  • Flexibility – Your home loan needs to meet your requirements. Therefore, it should enable you to make extra repayments, adjust your repayment schedule and have facilities.
  • Eligibility – Always look at the requirements for a home loan as not all loans suit pensioners. For instance, you may need a regular income or assets, to meet the lending. Therefore, if you don’t have these attributes there’s no reason to consider this loan.
  • Charges – All loans incur fees. But, some are higher than others. Thus, by looking at the costs, you can decide which loan is more affordable.
  • Terms – Lenders typically have varying loan lengths. As a result, compare these terms to each other to find the length that suits you.

Do you want to know more about home loan options available to pensioners? Then contact eChoice, we can help you determine if you’re eligible. Our brokers also have access to 100’s of home loan products, so we’ll find the right mortgage for you.

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