Loan borrowings when retired

Discussion in 'Loans & Mortgage Brokers' started by virgo, 20th May, 2020.

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  1. virgo

    virgo Well-Known Member

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    Question:

    When one is retired, and holds the title to a property clear of mortgage, can one later go to any of the Big 4 banks and re-borrow using that security ?

    Bear in mind one is retired, with no job and relies only on dividends and rent income.

    Thanks!
     
  2. Morgs

    Morgs Well-Known Member Business Member

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    In theory yes.... but the new borrowing will require evidence of income for servicing based on their specific policies
     
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  3. Peter_Tersteeg

    Peter_Tersteeg Well-Known Member Business Member

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    Possible in theory, practically it's very difficult to meet the servicing requirements.
     
  4. Rajiv Srivastava

    Rajiv Srivastava Active Member

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    I may be wrong but that concept is called Reverse Mortgage and that is allowed for retirees.
     
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  5. Peter_Tersteeg

    Peter_Tersteeg Well-Known Member Business Member

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    Great point, they are still available. There's a couple of niche lenders still offering these, but not the Big 4.
     
  6. Mark F

    Mark F Well-Known Member

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    I think that in today's climate I would be very hesitant about remortgaging a paid off PPOR when retired. While unlikely that the economy will be severely affected in the long term, the Australian aged pension is predicated on you owning your PPOR. Give some thought to how you would rebuild your life if you lost your home in a major economic downturn. As somebody who has rebuilt their finances later in life, but not retired, I shudder at the thought of doing it now I have been retired a couple of years.
     
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  7. Lindsay_W

    Lindsay_W Well-Known Member

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    Best to get your ducks lined up prior to retirement
     
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  8. kierank

    kierank Well-Known Member

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    One doesn't need a job to borrow money but one does need security, income and well-defined exit plan (at a minimum).

    We have been retired for 10 years and, over the last 10 years, we have borrowed a lot more than we ever did when we were working.

    But we do have:
    1. Good security - both property and shares.
    2. Good income - rents and self-funded pension (many from dividend payments) which we can increase at any time.
    3. Good business case which details income, expenses, etc for the next 5 years for the new property, for the portfolio before purchase and for the portfolio after purchase. The business case details risk management plans and exit plans.
    As an example, last year, we refinanced a $1M loan (split into a fixed component and a variable component). We were both aged 63. We were seeking I/O and were hoping to get a 12 year term. All was approved, with a 25 year term (we will be 88 when the term expires).

    In our experience, if one treats property investment as a business (a serious business; not a hobby or something that one is dabbling in) then the banks will treat one as someone they will do business with.
     
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  9. Islay

    Islay Well-Known Member

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    We need to bail a parent out after they took out a reverse mortgage. It was fine when it was organised there were two of them. We did not know there was a reverse mortgage until there was a problem many years later. After one passed and the other needed to move to more suitable accommodation the house that was mortgaged needed to be sold to fund the move. Surprise! There was a reverse mortgage that had started out at a reasonable amount but had been accruing interest for about 10 years.
     
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  10. Trish S

    Trish S New Member

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    Yes you can - as long as it makes financial sense and you pass the income test. Reverse mortgages rely on a minimum age. Not everyone takes retirement at retirement age so it does come down to your own situation
     
  11. New Town

    New Town Well-Known Member

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    The reverse mortgage is pure bad financial management.

    Some may not have many choices but it should be at the bottom of the list. Its a rip off
     
  12. virgo

    virgo Well-Known Member

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    Thanks for all your replies....

    Bear in mind it is not the PPOR i have in mind to offer the bank as security...(that is fully paid off ...)

    It is an IP that i will hold that is clear of mortgage..i intend to offer to the bank as a security...

    And back to the original question again...

    Will that allow me to borrow with the Big Four on retirement?
     
  13. Beano

    Beano Well-Known Member

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    When I retired my borrowing with the big 4 was $3m
    Since that date while retired I increased my borrowings peaking at $26m (indicative potential additional borrowings pre convid-19 $16m)
    So yes you can borrow while retired.
     
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  14. Peter_Tersteeg

    Peter_Tersteeg Well-Known Member Business Member

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    If you have enough income to meet their servicing criteria, sure. Otherwise no.

    It's highly unlikely that rental income from only one or two properties would be enough to meet the servicing criteria.
     
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  15. virgo

    virgo Well-Known Member

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    Thanks guys for all your replies....

    Before one retires, one should:

    1) call the banks and get your longest interest only loans.

    2) borrow whatever you want to borrow (for shares/another property)
     
  16. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    A lot depends on post retirement income

    Our oldest borrower was a man at 84, with cash out, and a 30 year loan term with a major

    Its not age related, purely income related

    ta
    rolf
     
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  17. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    Consider
    a) extending all loans back to 30 years or as long as possible
    b) extending IO terms if you think appropriate
    c) borrowing extra
    d) make sure the lender is appropriate

    and assume you will never qualify for finance again
     
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  18. Fargo

    Fargo Well-Known Member

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    No . for 2. You get lines of credit set up for maximum. That may mean reducing some lines of credit and credit cards, hire purchases and leasing at least 3 years before you want to retire. Engineer 2 years of higher income by bringing forward income from coming year, and realizing income ( delaying income) from trailing years. And do the reverse for expenses, pay early for first year, pay later for 2nd year. You may need to spend 3 years working extra hard to earn as much as you can and save as much as you can, spend as little as you can, to maximize borrowing capacity to set up for the future.
     
  19. Lacrim

    Lacrim Well-Known Member

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    How do you do this with PAYG?