Do you know how to fund a retirement home purchase?

Most lenders will consider your application when you're buying a retirement home, but they assess your income and serviceability very differently than they would for someone still in full-time employment.

The decision you're making is whether to apply for finance now or wait, and whether your current income sources will support borrowing. Lenders want to see that your retirement income is stable, verifiable, and sufficient to service the loan amount you need. Superannuation drawdowns, the Age Pension, rental income, and investment returns can all count, but each lender treats them differently.

Can you borrow if you've already retired?

Yes, but your application will be assessed on your post-retirement income, not what you used to earn. Lenders look at superannuation pension payments, government pensions, dividends, and rental income as ongoing income sources. They won't accept a lump sum sitting in your super as income unless you've set up a regular account-based pension or annuity that pays you a consistent amount each month.

Consider a couple who've both retired and are looking to downsize into a two-bedroom unit closer to family. They have $600,000 in combined super, own their current home outright, and receive a part Age Pension. If they want to borrow $250,000 to buy the new property before selling their existing home, the lender will assess their application based on their super pension drawdown and Age Pension income, not the super balance itself. They'd need to show regular pension payments that cover the loan repayments plus living expenses, typically documented through bank statements and Centrelink statements.

How lenders assess superannuation income

Lenders treat account-based pension income as assessable if it's being drawn regularly and is likely to continue for the life of the loan. They'll ask for your super fund statement showing the balance, the drawdown rate, and evidence of pension payments hitting your account. Some lenders will only accept super income if the balance is large enough to sustain drawdowns for at least ten years, while others are more flexible.

If you're under preservation age or haven't started drawing a pension yet, that income won't count. You'll need to set up the pension before applying, or rely on other income sources like rental returns or part-time work.

Does the Age Pension count as income?

Most lenders will accept Age Pension as part of your total income when assessing a home loan application, though some cap how much of it they'll include in their calculations. Centrelink income is considered stable and ongoing, which works in your favour. You'll need to provide a current Centrelink statement showing your payment rate and frequency.

If you're receiving a part pension and also drawing from super, both income streams can be combined. The loan amount you're approved for will depend on the total monthly income and your living expenses. Keep in mind that purchasing a new property or holding two properties temporarily may affect your pension entitlements, so it's worth checking with Centrelink before you commit.

Will your age affect loan approval or terms?

Lenders can't refuse your application purely because of your age, but they do assess whether you can service the loan for its full term. If you're 65 and applying for a 30-year loan, the lender will ask how you plan to repay it. Some lenders offer shorter loan terms or interest-only periods to align with your retirement plans. Others may approve a longer term but expect you to refinance or sell the property to repay the loan later.

In our experience, borrowers in their 60s and 70s often structure loans with a planned exit strategy, such as selling their current home within six to twelve months, receiving an inheritance, or downsizing again in future. Lenders want to see that plan documented and supported by evidence, like a signed sale contract or a valuation on the property you're selling.

Using sale proceeds to avoid borrowing long-term

If you're buying before selling, a bridging structure may make sense. This lets you purchase the retirement home using your existing property as security, then repay the loan in full once your current home settles. It avoids the need to move twice and the pressure of finding a new place within a short settlement window.

Bridging finance is assessed differently than a standard owner occupied home loan. Lenders focus on the combined value of both properties and the expected sale price, rather than ongoing income. You'll typically pay a higher interest rate during the bridge period, but the loan is short-term and designed to be cleared quickly.

What deposit or equity do you need?

Most retirees purchasing a home are using equity from an existing property or savings built up over decades, so deposit size is rarely an issue. Lenders generally prefer a loan to value ratio below 80% to avoid Lenders Mortgage Insurance, but some will lend higher if your income supports it.

If you're selling one property to buy another and need to borrow temporarily, your equity in the existing home becomes the effective deposit. The lender will value both properties and assess the total debt against the total security. You won't need to demonstrate savings in the same way a first home buyer would, but you will need to show that any funds being used for the purchase are genuinely yours and have been held in your account for at least three months.

Should you fix, split, or stay variable?

Retirement income is often fixed or semi-fixed, so repayment certainty can matter more than it does for someone still earning a wage. A fixed rate locks in your repayments for one to five years, which makes budgeting easier if you're on a pension or drawing a set amount from super each month.

A split loan gives you some certainty on part of the balance while keeping the rest variable, which can be useful if you plan to make lump sum repayments from a property sale or other windfall. The variable portion often comes with an offset account, which reduces the interest you pay if you're holding cash temporarily.

Variable rates also give you the flexibility to repay the loan faster without penalty, which matters if your plan is to clear the debt once your existing home sells or another asset is liquidated.

Structuring the loan around your income sources

If your income is mostly from super or the Age Pension, an interest-only loan may reduce your repayments enough to meet serviceability. You'd still need to show how the principal will be repaid, either through a future sale or other funds, but this structure can make the loan affordable in the short term.

Principal and interest repayments build equity faster and reduce the balance over time, which works if you have sufficient income and want to own the property outright. Some retirees prefer this approach even if it means borrowing less, because it aligns with the goal of reducing debt rather than carrying it long-term.

Your loan structure should reflect your actual financial position and plans, not a generic product recommendation. That's something a broker can help match to your circumstances rather than trying to fit your situation into a standard loan package.

If you're buying a retirement home and want to talk through your options with someone who understands how lenders assess post-employment income, call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions