Do you know how to finance a retirement home?

Buying a retirement home in Bulimba looks different to a standard home loan application because your income structure changes after you stop working.

Most retirees rely on superannuation drawdowns, the aged pension, or investment income rather than wage income, and lenders assess these differently. Some treat super drawdowns favourably if they come from a large balance, while others apply conservative assumptions about how long that income will last. The loan amount you can access depends on which lender you approach and how your retirement income is structured.

Can you borrow in retirement without wage income?

You can borrow using retirement income, but lenders require evidence that your income will continue for the life of the loan. Superannuation account-based pensions are usually accepted if your balance supports regular withdrawals over a long period. The aged pension counts as income, though some lenders shade it because payments are indexed rather than fixed. Rental income from investment properties is assessed at 80% of the gross amount to account for vacancies and management costs.

Consider a couple in their late sixties purchasing a townhouse in Bulimba's Hawthorne Street precinct. They receive a combined aged pension of around $42,000 annually and draw another $30,000 per year from superannuation. One lender might accept only the pension income and apply a conservative multiplier, limiting borrowing to around $150,000. Another lender might include both the pension and super drawdown, provided the super balance exceeds $500,000, and extend borrowing closer to $250,000. The structure of their retirement income stayed the same, but the lender's policy determined what they could access.

How does your age affect loan terms and approval?

Lenders typically require loans to be repaid by age 75 or 80, which shortens the maximum loan term available to older borrowers. A shorter term increases repayments, which in turn affects how much you can borrow based on your income. Some lenders will extend terms beyond age 80 if you demonstrate that income will continue, such as through a larger superannuation balance or investment property income that isn't tied to your working life.

If you're 68 and apply for a loan with a lender that caps repayment at age 75, your maximum term is seven years. Monthly repayments on a $200,000 loan over seven years sit well above $2,500, even at current variable rates. That repayment level might exceed what your retirement income can service. Switching to a lender that accepts loan terms to age 85 extends the term to 17 years and drops repayments closer to $1,300 per month, which becomes manageable on the same income.

What type of loan structure suits a retirement purchase?

Variable rate loans offer flexibility to make additional repayments or redraw funds without penalty, which suits retirees who might receive lump sums from downsizing proceeds or inheritance. Fixed rates lock in certainty but restrict prepayments, and most retirees prefer access to their equity if circumstances change. Offset accounts reduce interest without locking funds away, which works well if you're holding cash reserves for healthcare or aged care costs down the line.

A split loan can balance both priorities. You might fix half the loan for three years to protect against rate rises while keeping the other half variable with an offset account attached. If you sell an investment property midway through the fixed term, the variable portion can be reduced without triggering break costs, and the offset account absorbs any cash you want to hold separately.

Does Lenders Mortgage Insurance apply to retirees?

Lenders Mortgage Insurance is charged when your loan to value ratio exceeds 80%, regardless of your age. If you're purchasing a property in Bulimba at the current median and borrowing more than 80% of the purchase price, LMI will apply unless you qualify for a waiver. Some lenders offer no LMI loans to professionals or borrowers with strong income profiles, but those waivers are less common for retirees because wage income usually drives eligibility.

LMI premiums are calculated based on loan amount and LVR, not age. A retiree borrowing $300,000 at 85% LVR pays the same premium as a younger borrower in the same position. However, because retirees often have shorter loan terms, the higher repayments can make borrowing above 80% unaffordable even before LMI is factored in. Most retirees purchasing in Bulimba bring a deposit above 20% from downsizing proceeds or savings, which avoids LMI and improves serviceability.

How do downsizer contributions affect borrowing?

If you're over 55 and selling your home, you can contribute up to $300,000 from the sale proceeds into superannuation as a downsizer contribution without it counting toward your contribution caps. This boosts your super balance, which can improve your borrowing capacity if the lender assesses your super drawdown as income. A larger balance supports higher annual withdrawals, and some lenders will accept a higher percentage of that drawdown as ongoing income if your account balance sits comfortably above the amount needed to fund the loan term.

In a scenario where you're purchasing a unit near Bulimba's Oxford Street shops and contributing $200,000 from your previous sale into super, your account balance might increase from $400,000 to $600,000. If the lender accepts super drawdowns based on a percentage of your balance, that increase could lift your assessed income by several thousand dollars annually, which translates directly into additional borrowing capacity. Refinancing an existing loan after making a downsizer contribution can also unlock better terms if your new balance improves your income assessment.

What documents do lenders require for retirement income?

Lenders ask for recent superannuation statements showing your account balance and withdrawal amounts, Centrelink statements if you receive the aged pension, and tax returns if you have rental or investment income. If you're drawing from a self-managed super fund, they'll want the fund's financials and evidence of regular pension payments. Some lenders require a letter from your financial advisor confirming that your super balance supports the proposed drawdown rate for the expected loan term.

The assessment becomes more detailed than a standard wage earner application because lenders are calculating sustainability rather than just current income. They want to see that your super won't deplete before the loan is repaid, or that other income sources like the pension or rent will cover repayments if your super runs low. Providing a clear picture of your assets and income upfront reduces the chance of delays once your home loan application is submitted.

Call one of our team or book an appointment at a time that works for you. We'll assess your retirement income against lenders who genuinely work with retirees and structure a loan that fits how you're actually funding the purchase.

Frequently Asked Questions