Refinancing While Retired – What You Should Know

September 19, 2017


Can you still refinance your mortgage when you are retired? Or, are you stuck with your current loan once you reach a certain age or are no longer working?

You can technically refinance at any point in your loan but you’ll have less opportunity the older you get. Most lenders have age restrictions or extra requirements as borrowers get older. Still, it is a wise practice to review your mortgage every year or two to determine if it is the best fit for you or if you may be better off refinancing.

Benefits of Switching Loans in Retirement

A generation ago, when property prices were relatively lower in Australia, more homeowners were paying off their mortgage before reaching retirement age. This isn’t the case any longer. With larger mortgages and a higher cost of living, many borrowers aren’t entering the property market until they are older. Also, if you extend the length of your loan when you refinance to lower your repayments, you’re more likely to still have a balance to pay off even after you have stopped working.

In retirement, it’s likely you still owe some money and at the same time have built-up a lot of equity. This means you can refinance and benefit if you want to:

  • Save money by switching to a lower interest rate
  • Change to a fixed interest loan for peace of mind because your monthly repayments will stay the same
  • Refinance to a line of credit loan to free up some cash at your mortgage’s low interest rate to consolidate debts or make purchases

Refinancing over 55

What about your age? Does it matter how old you are to lenders?

The older you are, the less refinancing flexibility you will have. This is because, once you stop working, unless you have another source of ongoing income like investment income, living off your superannuation makes you a riskier borrower. Also, the older you get, the less likely you’ll be able to manage a loan with a long term.

Even after 45, you are going to have to demonstrate that you have enough money in superannuation to continue making repayments on your loan until it is paid off. You’ll also have to have a post-exit strategy in place for your anticipated retirement.

By 60, most lenders will decline your application without an ongoing income or enough assets. Older borrowers, such as those in their 70s or 80s without post-retirement, will only be able to take out a reverse mortgage, which many Australians use to cover medical or elder care expenses later in life.

Exploring Your Refinancing Options

As it is more difficult to refinance after you’ve retired, you may want to seek the advice of a mortgage broker. They can help you find a lender who is likely to approve your loan application and also discuss your options with you for meeting your financial goals.

If you’re worried about keeping up your repayments or simply want to reduce your bills so you have money to use to enjoy your life, another option is to downsize. Once your children have grown up and moved out, you may not need a large house. When you no longer have to commute to work, you will also have the freedom to move to a new, less pricey location.

Retirement is not a time you should be burdened by debt or worrying about your mortgage. Think about what’s right for you – whether you want to refinance to save money and get out of debt, or to have more flexibility. Or, you may want to simply continue with your current loan or even downsize. As long as you know what your goals are, there is a best strategy for making the most out of your home loan during retirement.

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