Is Your Mortgage Causing You Sleepless Nights?
Is having to make regular repayments to the bank taking the fun out of retirement? If you’re retired and still paying a mortgage, there’s a fair chance it’s taking a sizable chunk from your retirement income each month. You’re certainly not alone – an increasing number of Australians are carrying mortgage debt into retirement.
There is a solution.
You can stay in your home, refinance that home loan, and free up your retirement funding to enjoy a more comfortable retirement lifestyle. Using your Household Capital™, the wealth built up in your home, you can replace your home loan with a Household Loan, and enjoy the flexibility that gives you.
How Much Home Equity Can You Borrow?
Whether you need to consolidate debts, increase income or peace of mind see how a Household Loan can help you.
Frequently Asked Questions
Why refinance in retirement?
You can refinance an existing home loan by using your home equity, the savings in your home. This frees up your cash flow to improve your longer-term retirement funding. You can choose to make interest repayments each month or repay the loan when you sell or leave your home. Consumer protections, such as guaranteed lifetime occupancy, are part and parcel of refinancing with a Household Loan.
Should I refinance or downsize?
Home ownership and the family home is a strong part of the Australian identity, one that doesn't change when you retire. Home is where you’ve raised your family, created memories and established your community.
Until recently, most retirees faced with unserviceable mortgage debt felt they had no option but to sell their home. This isn’t an ideal option for everyone – appropriate housing isn’t always available in the right area and most people want to stay in their community.
Downsizing into a smaller home or unit, or even a retirement village, can result in disruption and dislocation and doesn’t always deliver a financial advantage.
Using a Household Loan, it is possible to refinance a mortgage in retirement without needing to downsize. Download our free downsizing for seniors guide to learn more
How can I refinance a home loan in retirement?
Banks are rarely willing to help retirees refinance a mortgage and we’re often asked whether we can help older Australians refinance a home loan. The answer is yes, although as with all loans, terms and conditions apply.
Our Household Loan can be used to refinance an existing bank mortgage and has three key benefits for retirees over a traditional bank mortgage:
- Improved retirement funding – as you don’t have to make regular repayments, the money you were using to service your loan can instead be used to fund your retirement
- Interest payment flexibility – you can choose to make regular interest repayments, however, there is no obligation to do so
- Guaranteed occupancy – whether you choose to make repayments or not, you have guaranteed occupancy of your home until you choose to leave it. There is no risk of foreclosure for missing a payment.
What should I consider if refinancing a home loan?
If you’re going to refinance your mortgage, whether with a traditional bank mortgage or with a Household Loan, you need to consider the following:
- Do you want to increase the retirement funding available to you?
- Do you want to be able to pay off the loan at any time without penalty?
- Do you want to be able to make interest-only repayments?
- Do you want flexibility?
- Do you want guaranteed occupancy?
Why refinance with a Household Loan?
There are three key reasons why you should consider refinancing a standard home loan with a Household Loan in retirement:
1] Flexibility and choice - you don’t have to make any regular repayments. But you can repay part or all of your a Household Loan at any time without penalty. It's up to you.
2] Improved retirement income - because there's no requirement for regular payments, the income previously directed to repayments can be used for other purposes.
3] Guaranteed occupancy - Household Loans are a responsible, long-term retirement funding solution that come with a range of consumer protections, including lifetime guaranteed occupancy...even if you choose to make no repayments.
What should I look out for when refinancing in retirement?
When thinking about refinancing in retirement, there are two big issues – repayments and default. With a traditional mortgage provided by a bank or building society, regular repayments are required. If you become unable to meet those repayments, you can run the risk of default and the bank forcing a sale or repossessing your home. With a Household Loan, regular repayments are not necessary and as such, there is no default risk. You are able to stay in your home as long as you wish. Repayment is required once you sell or leave your home. It’s worth noting, you are able to make regular repayments on a Household Loan if you choose to do so. A Household Loan can be repaid at any time without penalty.
How does interest work on a Household Loan? Accessing the savings in your home using a refinance Household Loan will reduce the amount of equity you have in your home over time.
Because regular repayments are not required, the interest added to the loan balance compounds over time. This means you pay interest on your interest. Over time, the amount you owe the lender will increase. The longer the term of your reverse mortgage, the more interest compounds.
Alternatively, Household Capital offers an 'interest only' facility, where you can make regular payments so that at the end of the term, only the amount you borrow is repayable.
See more on interest rates and fees.
*The Comparison Rate is based on a loan of $150,000 for 25 years. WARNING: this comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.
Customer Stories: An Unplanned Retirement
Michael is 66 years old and lives in North Sydney. He has a younger partner and two children, one completing Year 12 at a private school. His house represents the majority of his wealth, valued at $7.4 million.
Circumstances brought on by the COVID-19 pandemic forced Michael to bring forward his retirement plans. He had planned to continue to work for several more years to pay down his mortgage, get school fees out of the way and then realise the value of his property by downsizing.
Michael had been self-employed for a good part of his career and did not have much in the way of superannuation. Household Capital was able to refinance a large outstanding home loan and provide an income for the next five years.
By drawing on a small portion of his Household Capital™ Michael was able to improve his retirement cash flow in two ways: by no longer making monthly mortgage repayments to the bank and by establishing a regular income stream.
Note: customer names and images have been changed to protect their privacy.