Home loans for pensioners: can a pensioner get a home loan?

If you’re retired and living on a pension you might think you wouldn’t qualify for a home loan. But there are options that may be available, including some help from the Australian government.

An elderly couple moving in to their new home. Image: NDAB Creativity/Shutterstock.com

If you’re retired and living on a pension you might think you wouldn’t qualify for a home loan. But there are options that may be available, including some help from the Australian government.

As a pensioner, there could be many reasons why you want to take out a home loan. You may want a loan to move to a new home that’s more suitable or you may want a second home or an investment property.

Key points:

You may be able to get a home loan as a pensioner.
Any lender will want to know your ability to service or repay any loan.
Lenders generally want to see a loan repaid by the time a person reaches 75.

Whatever the need, lenders will want to know your ability to service or repay any loan. As a pensioner, that means you’ll likely have to jump through a few more hoops than a younger borrower.

The Australian Securities and Investments Commission (ASIC) says any credit provider is bound by regulations to make sure they only engage in responsible lending. That means they must make sure they don’t enter any contract with you that’s considered unsuitable for the consumer.

It’s up to each individual bank or other lender to determine how it assesses your financial situation to decide whether it’s prepared to offer you a home loan.

As a pensioner, do I need an exit strategy for a home loan?

As a typical home loan is usually repaid over a lengthy time frame (25 to 30 years) many lenders will want to establish what’s known as an exit strategy. It’s an agreed plan on how you intend to pay off any loan should you run into any difficulty. Lenders generally want to see a loan repaid by the time a person reaches 75.

What type of home loans are there for pensioners?

There are a number of different types of home loans for pensioners that you may be able to apply for. They could include a:

You should shop around to see what different types of loans may be available to you, and what interest rates, fees and other costs they may charge. Read carefully any Target Market Determination (TMD) and Key Facts Sheet (KFS). You may also consider obtaining suitably qualified financial advice.

A reverse mortgage is when a bank lends you a portion of the value of your home and then uses your property as security.

Reverse mortgages in Australia are reserved for those aged 60 years and older. Unlike a standard home loan, there are no scheduled repayments required. With a reverse mortgage, the interest repayments are added to the balance of the loan, and the loan is typically only repaid when you either:

sell the house
move into aged care
die.

The amount of money you can borrow through a reverse mortgage depends on the equity you have in your property and your age. For example, the federal government’s Moneysmart website says that the most you can borrow if you’re aged 60 is likely to be around 15% to 20% of the value of your home (increasing by 1% for each year over 60). So if you’re 65, that could be between 20% to 25% of the value of your home.

There are risks with a reverse mortgage as the interest rate is likely to be higher than on a standard home loan. The interest charged on the loan also compounds over time, which means the amount you owe may get bigger. Any reverse mortgage taken out since 18 September 2012 should have negative equity protection, which means you can’t end up owing more than your home is worth.

A line of credit home loan uses the equity in your home to allow you to withdraw funds, based on a credit limit approved by your bank or lender. The money can be drawn all at once or spread out over time, making it a flexible financing option.

You generally only need to pay interest on the amount of money you have drawn down at any given time, not the full credit limit. These types of loans can come with some disadvantages, such as potentially higher interest rates than typical principal and interest home loans.

→ Related article: What is a home loan redraw facility?

A variable rate home loan is where your lender can change your interest rate at any time and therefore the amount of your regular loan repayment can change along with this. Depending on the size of the loan, even a small change to your interest rate can cause you to pay significantly more or less in repayments. Most variable rate home loans aren’t specifically designed for pensioners who receive all or part of the Age Pension from the federal government.

Any increase in pension payments that reflect changes to living costs only happens twice a year (in March and September) so any money you get won’t necessarily increase at the same time as any loan repayment increase due to interest rate rises.

A fixed rate home loan allows you to lock in an interest rate for a set period of time, generally from one to five years. That means the interest rate you pay will stay the same for this period.

Fixed rate home loans are generally not as heavily influenced by changes to the RBA cash rate as variable rate loans.

A fixed rate home loan can provide a degree of cash flow certainty, as you know exactly how much you’ll need for each regular repayment over the fixed rate term.

At the end of that set period you may be able to move to a variable rate home loan, or negotiate a new set period at a new fixed rate.

Be mindful though, that as the variable interest rates rise, you may see a significant jump in the amount you may have to pay in regular loan repayments once any set period expires. Should variable interest rates go down during your fixed term, you may end up paying more than you need to in interest.

The Home Equity Access Scheme (the former Pension Loans Scheme) allows you as an eligible pensioner to apply for a non-taxable loan from the Australian Government. You need to be of Age Pension age or older and eligible for a qualifying pension. You also need to own real estate that can act as security against the loan.

The loan amount can be up to 1.5 times the maximum payment rate of your eligible pension, depending on your age and how much equity you own, and paid fortnightly although you may be able to get an advance payment as a lump sum.

You must repay the loan and any associated costs but the loan is usually offered at a lower rate than a traditional home loan. Check with Services Australia to see if you may be eligible to apply and if so, how much you may be able to borrow.

Can I receive a home loan if I am on a disability pension?

Most lenders will generally view a disability pension as a form of income. That means approval for a home loan may be based on the usual factors such as how much money you want to borrow, how much income your pension provides and your ability to repay the loan.

You may need to provide proof of income and assets among other things, similar to any other home loan application.

Can I get a home loan on a single parent pension?

If you’re a single parent you may be eligible for certain government payments, sometimes referred to as a single parent pension.

Whether you can get a home loan will depend on whether you can convince a potential lender that you will be able to repay or service that loan. Some lenders will consider Centrelink payments as part of your income.

Before making any decision on a home loan you’d be wise to seek some independent financial advice. You should also shop around to see what different types of loans may be available to you, and what interest rates, fees and other costs they may charge. Read carefully any Target Market Determination (TMD) and Key Facts Sheet (KFS).

Cover image source: NDAB Creativity/Shutterstock.com

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This article was reviewed by our Editor-in-Chief Nina Rinella before it was updated, as part of our fact-checking process.

Mandy Beaumont

Former Content Lead

Former Content Lead, Mandy Beaumont, has had a long career in the publishing and university sector as an award-winning author, journalist and creative writing academic. She’s been a course convenor in creative writing and communications at Griffith University for more than a decade, holds a PhD and a master’s in creative writing from RMIT and QUT respectively, and has written for The Big Issue, Melbourne Writers Festival, the Australian Council of Trade Unions the Queensland Nurses and Midwives’ Union, as well as many other well-known newspapers and journals in Australia and overseas. Mandy’s short fiction writing and her novels have won, been shortlisted and longlisted for prestigious prizes and awards such as The Stella Award, the QLD Literary Awards, the Richell Prize, the Dorothy Hewitt Award and the MOTH International Short Story Award. Mandy released a new novel with one of Australia’s largest publishing houses, Hachette Publishing in early 2025 called The Thrill of It. After many years of working with trade unions and renting, Mandy has a keen interest in superannuation (particularly worker’s capital) and the housing market in Australia.