Once you have retired and are living on a pension, it is often difficult to secure a home loan. Many investors and lending agencies are unwilling to assist with home loans for several reasons. First, they fear that the pensioner, depending on age, will die before the home is paid off and no one else will be able to pay the outstanding debt. Secondly, the income level is not likely to change so if they get into financial trouble, there is no additional money to bail them out. Adding to their concerns, many retirees tend to have a low fixed income and possibly impaired credit. Fear not, however, there is some hope for those pensioners wanting to purchase a home.
Below is a list of some of the more popular options available. It is also highly recommended to check your State/Territory government websites to see what incentives they may have in place as these can be different depending on where you live. Visit our Helpful Resources section for links to useful government websites.
Prove Your Worthiness
In order to prove your worthiness to purchase a home, you must present yourself as financially stable. By having active credit and being a financial citizen with a regular source of income, the bank will view you as someone eligible for a pensioner’s home loan. If you can show that you have money for a down payment and fees, this may help. If you already own other properties of any kind, these may be used as collateral for the advances towards the home loan.
Know Your Entitlements
If this is the first time you are purchasing a home, see if you qualify for the federal government’s First Home Owner’s Grant (FHOG). If you meet the eligibility under the scheme, you may receive up to $7000 for being a first time homeowner. This can help with your deposit and home loan fees. There may also be state bonuses available to you. *note: this amount can change based on State or Territory and additionally can change based on government.
The Access Home Loan Scheme can help a pensioner that is disabled to buy a home. With a deposit of 2% or $2000; you may be able to purchase a home for $412, 000 or less. In order to qualify you must have an impairment that is permanent, good credit history and rental history, owe no money to the Department of Housing and Keystart, and meet the lending criteria. With this loan you can borrow as much as your income and other commitments allow and the interest rate will be variable.
If you are concerned about your banks using your income as a disqualifier see if you qualify for a Low Doc or No Doc loan. This means that very little documentation will need to be provided in order for you to be approved for a mortgage. With this loan you simply state your income and assets. You may even be able to pick your own interest rate. Remember if you choose this type of loan you can only borrow 80% of the value of the home and the interest rate may be higher.
For a pensioner, there are obstacles that must be overcome in order for them to buy a home. For pensioner home loans you must prove yourself credit worthy, and financially stable. You can look into many entitlements like the First Homeowner’s Grant, The Access Home Loan Scheme, or a Low Doc or No Doc Loan. Regardless, of which type of loan you get, make sure you have reviewed your finances and can comfortably make your payments. Purchasing a home you cannot afford is worse than renting, so sit down, review the numbers, and choose your home loan wisely.