Should retirees have home loans?

Retirement is typically associated with financial stability, reduced debt, and a slower pace of life. For many seniors in Australia, owning a home outright is part of that ideal.

However, rising living costs, later-life expenses, and changing housing needs mean more retirees are considering or carrying home loans. But is having a home loan in retirement ever a good idea? 

There are several reasons retirees might consider a home loan: 

• Downsizing or relocating. You may want to buy a more suitable home, closer to family or medical facilities, before selling your existing property. 

• Helping family. Some retirees choose to access equity to help children enter the housing market. 

• Refinancing. If you enter retirement with an existing mortgage, refinancing to a lower interest rate or different loan structure might ease financial pressure. 

• Home renovations or accessibility upgrades. Retirees may borrow to make their home safer or more comfortable for ageing in place. 

The pros

• Access to capital. A home loan can free up funds that would otherwise be tied up in property, helping with large one-off expenses or providing financial breathing room. 

• Potential tax advantages. In certain investment scenarios, interest payments may be tax-deductible (though this is more relevant to investment properties). 

• Better loan products for older borrowers. Some lenders now offer “retiree-friendly” home loan products with flexible repayment terms. 

The cons

• Reduced retirement income. Loan repayments must be made from superannuation, pension payments, or other retirement savings, potentially straining your budget. 

• Risk of foreclosure. If you can’t meet repayments, your home could be at risk. 

• Less financial freedom. Carrying debt into retirement can limit lifestyle choices or emergency spending. 

• Loan approval hurdles. Many lenders require proof that the loan can be repaid within a “realistic lifespan”, which can restrict options for older applicants. 

Before taking out a home loan, you may want to explore other options such as:

• Downsizing to free up cash

• Reverse mortgages (equity release products)

• Government support schemes or grants

• Accessing superannuation under certain conditions.

While a home loan in retirement isn’t ideal for everyone, it can make sense in specific situations — provided it is part of a carefully considered financial plan.

It’s essential to seek advice from a registered financial adviser or mortgage specialist who understands the unique needs of retirees before making a decision.