What do you do when your income is slowing down but you’re still making repayments? It is increasingly common for people to be continuing to pay off mortgages into retirement. We’ve answered our clients’ most common questions when it comes to refinancing as a retiree:

Why can it be harder to refinance as a retiree?

Lenders tend to view retirees as higher risk – generally speaking, a retiree’s income may be less that the average income. Traditional home loans tend to have terms between 20-30 years, however those looking to refinance over the age of 50 usually need to apply for shorter loan terms. As a result, repayments may be higher at a time when income is less that what was earned during your working life.

Is refinancing close to or when I am retired possible?

It is definitely possible, although may come with some additional criteria to the typical refinance. A knowledgeable credit advisor can pinpoint appropriate lenders, suitable mortgage products and assess your eligibility before you enter into an application.

How can I maximise my application?

Determine Your Finance Needs

Do you want to decrease interest and fees? Fix a rate for financial security? Free up equity? Downsize? Weigh up the costs that come with refinancing, including possible break fees and government charges, to make sure that the savings you will make balance against the cost of any changes.

Consider Your Bargaining Power

Do you have regular income from investments such as shares, a business or rent? Lenders look favourably on steady income streams. They will also do a thorough check on credit ratings and histories. Knowing where you stand can be the catalyst to start improving these.

A credit advisor can assist in determining your financial needs, income streams and credit rating before you make an application.

Demonstrating Your Income

Although by definition you will no longer be working or receiving a wage, you may still receive regular funds from other sources, such as investments. Not all income is created equal, so we’ve outlined common retiree income streams and considerations to take into account.

Type Of IncomeProof RequiredProportion AcceptableConsiderations
Dividends2 Years Tax Return80%Blue chip shares are preferred
Rental IncomeRental Statement80%Commercial properties will be treated differently to residential
Interest Income2 Years Tax Return80%Can only use this income if the cash is not required for living expenses
Superannuation PensionsSuperannuation Statements and Bank Statements100%It is important that capital is not being depleted
Old Age PensionsPension Statements and Bank Statements100%Receiving government benefits may indicate low assets or income and preclude a refinance
Dividends
Proof Required2 Years Tax Return
Proportion Acceptable80%
ConsiderationsBlue chip shares are preferred
Rental Income
Proof RequiredRental Statement
Proportion Acceptable80%
ConsiderationsCan only use this income if the cash is not required for living expenses
Interest Income
Proof Required2 Years Tax Return
Proportion Acceptable80%
ConsiderationsCan only use this income if the cash is not required for living expenses
Old Age Pensions
Proof RequiredSuperannuation Statements and Bank Statements
Proportion Acceptable100%
ConsiderationsIt is important that capital is not being depleted
Superannuation Pensions
Proof RequiredPension Statements and Bank Statements
Proportion Acceptable100%
ConsiderationsReceiving government benefits may indicate low assets or income and preclude a refinance
Presenting Your Financial Plan

Lenders like to see that you have considered your financial plan for the next 10–20 years – particularly your plan to pay off your mortgage. It’s best to factor in both your ongoing repayments as well as annual expenses, including consideration of expenses you may not plan so far in advance like medical expense or, more enjoyably, a holiday. At this time you might like to engage a financial planner who has expertise in retirement planning.

Although laying out long-term financial plans and refinancing a mortgage are not the first things you’d like to tick off your bucket list when you are approaching retirement, they are key to guaranteeing yourself an enjoyable and financially stable retirement in the future.