Do not let your age stop you from buying your own home. Here are some tips to get you started.
Although some lenders view retirees as high risk borrowers, there are still lenders willing to offer home loans to people receiving retirement benefits. Read on to find out more about the options available.
Considerations when applying for a home loan on a pension
Retirees who apply for a home loan should keep in mind that their income and financial situation may limit their success in securing a home loan. This is mainly because the pension is lower than the normal income of other applicants who apply and the level of income required. If you have assets and believe that you can meet the loan requirements, it may be wise to discuss your situation in person with your financial provider or mortgage broker, because an online application can be difficult if you do not have a loan. can not demonstrate your ability to repay the loan.
What types of home loans might be available for retirees?
- Reverse mortgages. A reverse mortgage allows you to borrow funds using the equity of your home as collateral for the loan. A reverse mortgage can be paid in the form of a lump sum, regular income, line of credit or a combination of these. No income is required to qualify and for this reason the interest rate tends to be higher. You must repay the amount you borrowed when you sell your home, die or move to a retirement home.
- Variable rate loans. Floating rate loans are a common loan option in Australia. With a variable rate loan, your interest rate is subject to change based on interest rate fluctuations. For example, when interest rates are low, the interest rate of your loan should also be low, allowing you flexibility and possible savings.
- Fixed rate loans. A fixed rate loan is safer than a variable rate loan. With a fixed rate loan, the interest rate on your loan will be fixed immediately and you agree to respect this rate for the entirety of your loan. This means that you avoid possible fluctuations in interest rates and that you also know your repayments. This type of loan avoids the stress related to interest rate changes.
- Line of credit loans. A line of credit is a line of financing that uses the equity in your home. This is an approved amount that you can use one at a time or all at once. Your loan is approved with a guarantee and you can draw at any time. You only pay interest on the amount you use. For example, if you have a $ 200,000 line of credit and only use $ 50,000, you only pay interest on that $ 50,000. These are good for those who do not know if they need the full value of a loan.
How to compare real estate loans
- Interest rate. Interest rates are one of the most important items to compare because interest is the biggest expense for home loans. For retirees, it is important to look for the lowest interest rate as this will save you money.
- Flexibility of the mortgage loan. It is important that your home loan offers you a lot of flexibility. This can be flexibility in repayment schedules, flexibility to make additional repayments and redesign facilities. Compare each loan and see what flexibility it can offer you.
- Eligibility criteria. Some home loans will require that you meet certain conditions to be able to take out this mortgage. This can include a regular source of income, a good credit history, and so on. Retirees in particular should compare the eligibility conditions of home loans, as some may be more appropriate than others.
- Fees and charges. Most home loans have mandatory fees and charges that you may have to pay. Compare the potential fees and charges for each loan (these may be upfront fees or ongoing charges) and select an option with lower fees to save money.
- Term of the loan. Each home loan provided by the financial lenders will have different loan terms. Compare and select the home loan that provides you with the loan term that fits your needs.
Am I eligible for a home loan if I am on a disability pension?
Generally, a disability pension is considered a valid form of income by most lenders. As a result, an application for a home loan for a person who is on a disability pension is not treated differently from a claim in which a person pays other income in the form of a loan.
Like any home loan seeker, the lender will determine if the amount of income support you receive is sufficient to allow you to repay the loan comfortably.
Most lenders will review your application on a case-by-case basis. Your eligibility for a home loan will depend on how much income you receive and how much of it can be used to pay a loan.
Other factors, including your age, assets and debts, will be assessed individually by a lender.
Each lender will have different eligibility criteria. It is therefore best to go directly to your broker or mortgage lender to determine if a home loan is right for you.
Additional documentation for pensioners
Among the other eligibility criteria required by the lender, you will usually need to provide the following:
- Proof of funds to complete the deposit.
- Bank statements indicating that Centrelink benefits have been paid into your bank account (that is, some lenders require 6 months of recent bank statements).
- Letter from Centrelink confirming the status and nature of your disability pension.
Am I eligible for a home loan if I am receiving a veteran’s pension?
Many lenders can accept a veteran’s pension as a source of income for a home loan. This applies if you receive:
- Veterans’ Widows’ Pension or War Widows’ Pension
- Department of Veterans Affairs Pension Service
- Veterans Affairs Old Age Pension
In addition, lenders may accept the Veterans Affairs Disability Pension as a source of income.
To demonstrate that your pension is a source of income for a mortgage application, you must have either an up-to-date bank statement showing your pension payment or a current statement from Veterans Affairs Canada.
Pros and Cons of Real Estate Loans Available to Retirees
- Gives you money when you need it These home loans allow retirees to enter the real estate market and give you the funds you need, when you need them.
- Additional benefits. Some real estate loans offered to retirees come with additional benefits such as low or zero interest rates, flexible payment plans and advance payments.
- No proof of income required for reverse mortgages. With reverse mortgages, no proof of income is required. It is important to note that other housing loans will require proof of income unless it is a cheap loan.
- Higher interest rate. Reverse mortgages tend to have higher interest rates than other home loans.
- Qualifications. Some home loans have specific eligibility requirements that you must meet and that can be quite strict.
Frequently Asked Questions about Real Estate Loans Available to Retirees
What is a mortgage?
A home loan is an advance of money provided to a borrower by a lender who wants to buy his own home or land to build his home. The lender will give you the money you need to buy your home or make improvements. Housing loans are mainly for those who wish to enter the property market but do not have the full value of their property. Housing loans are better for anyone with a good credit history and want to buy a house but do not have all the funds.
How do real estate loans work?
When you want to buy a house without having the total amount of funds you need, you have to apply for a home loan. Generally, you apply for a home loan if you qualify for each financial lender. With most home loans, you have to pay a deposit. Typical deposits tend to be around 20%, but in some circumstances your deposit may be as small as 5%. The lender will give you the money you need to buy your home and you are required to repay the loan within a specified period, as well as interest on the loan and any additional charges.
Can I still apply for a regular home loan?
Yes, retirees can still apply for standard housing loans that are not specific home loans for retirees, but keep in mind that you may not succeed if you do not meet the eligibility criteria. returned.
Other than my pension, what else will be taken into account in my mortgage application?
Any other form of income you may receive, your credit history and any other assets that may be in your name may be used to improve your mortgage application. Usually, your pension is taken into account if it is taxable.
Will I need a deposit if I get a disability pension?
As a general rule, a person receiving a disability pension will have to deposit a deposit of 20%. This is because there is no other salary or other source of income that can be used to service the loan. There is little security in the event of a loan default.
Again, this criterion varies from lender to lender.
If I get a disability pension, what if I have a co-borrower?
If you take out a mortgage with a co-borrower, your ability to cope with your repayments is usually increased, so the lender will consider you a less risky borrower. In this case, your application may be more likely to be approved.
Some lenders can only accept your application if your co-borrower is working. For example, some lenders will assist you if you buy a new home with your son or daughter. However, some banks may not be able to help you if you borrow yourself.