What are boomer home loans, and how do they work?

Three golden oldies laughing because they have a boomer home loan.

Rising interest rates have rapidly priced many Australians out of easy home ownership. But the conversation tends to leave out a generation expected to have it all: Boomers. 

Born between 1946 – 1964, “Baby Boomers” make up 21.5% of the Australian population (according to the latest Census) and generally have the highest rates of home ownership. However, it’s not a universal rule, and many older Australians have unique borrowing needs not catered to by traditional lenders.

So what options do senior Australians have for home loans? Let’s dive in.

What are boomer home loans?

Collage of a boomer hands overlaid with bright colours.

Boomer-style home loans are mortgages designed specifically for older Australians. While age is just a number, senior citizens have different needs than younger Aussies when it comes to financing a home – and a few unique obstacles, too.

For instance, Boomers tend to already have an owner-occupied home which they either own outright or partially through an existing mortgage. This means they’re dealing with a greater amount of home equity than younger buyers, which they can leverage as a unique income stream or source of wealth. But it also means they still have debt to deal with – and not many years of working life left.

Because of this, banks often see older borrowers as a risky investment and slap them with higher interest rates, especially if they try to refinance close to retirement. With wages stagnating and many Boomers aged out of jobs with competitive salaries, this can sometimes present a genuine issue for affordability, especially for women, people of colour, and younger Boomers who haven’t yet broken into the property market.

What are boomer home loans used for?

Collage of a boomer wondering what a boomer home loan is.

Generally, Boomers have two goals when it comes to home loans: clearing mortgage debt and taking advantage of their equity. Here’s how.

Clearing mortgage debt

For those thinking of retiring, it’s important to pay off the remainder of their mortgage in a timely manner. This eases their debt and expense burden so they can enjoy a comfortable post-work lifestyle. 

If your mortgage repayments have become too steep, or you would like to accelerate your repayment timeline, it’s critical to compare options out there that offer:

These features can provide strategies for saving on interest and time, especially if you find an offer suited to your needs and budget. Boomers may also have to search for smaller lenders, like credit unions and mutual banks, to find deals catering to them. (Be aware of any hidden fees or hoops you may have to jump through when discharging your mortgage, too).

Another option to consider is a debt consolidation loan, which combines all your existing debts (credits cards, personal loans, mortgages) into one secured loan. This can come with a slew of catches, however, and can potentially put you deeper into debt than when you started. Always talk to a financial advisor first before pouncing on a deal that may be too good to be true.

Using home equity to your advantage

Owning property can be a significant source of wealth. In specific circumstances, Boomers can also use their home’s value, or ‘equity’, as a source of funds or income. How? There are several methods.

The first is through a reverse mortgage, which is a type of loan that uses your property as a security in exchange for a lump sum, ongoing payment, or line of credit. Older homeowners with considerable equity built up (like those who benefited from the 2021 property boom) can take out a reverse mortgage as a way to supplement their retirement income. 

This has become an increasingly popular option in recent years, though all of the big lenders have withdrawn from the reverse mortgage game for now. Those hoping to compare options will be better served with smaller lenders – though beware falling into the trap of negative equity, i.e. borrowing more than your home is worth.

This is mostly a problem if you’re not done paying off your mortgage or if you plan to sell, but if you’re considering taking out a reverse mortgage, look for loans secured with the No Negative Equity Guarantee so you don’t get in over your head.

RELATED: Rising interest rates aren't the only reason why it's harder to get a home loan

Another option is to use your home’s equity as a source of funds for investments like property, shares, or even travelling abroad. Typically, banks will unlock a maximum of 80% of your property’s value, minus whatever you owe them, for you to use as capital, but this can still be a significant source of money.

For instance, say you own a property worth $1 million and owe $300,000 left on your principal balance. Your bank would cap you at 80% of your home’s value ($800,000) minus what you owe (-$300,000), leaving you with $500,000 worth of unlockable equity. 

A housing deposit this size could allow you to borrow up to $2 million for an investment property, which can be a serious game changer for the property markets like those in Australia’s capital cities. Just keep in mind you’ll also have to budget for other costs associated with buying property, like government stamp duty.

Loan details

Rate change

Repayment change if rates go up

Pros and cons of boomer centric home loans

Collage of a boomer thinking about her budget.

Like all financial products, boomer home loans come with risks and rewards. For instance, if you take out a reverse mortgage…

Pros:

  • New income source in retirement.
  • Repayments are typically flexible.
  • Variable interest rates.
  • Use equity to your advantage.

Cons:

  • Still a form of debt.
  • Not available to everyone (age limits usually apply).
  • Variable interest rates.
  • Reduces your equity.

The best boomer home loan for you will ultimately depend on your needs and circumstances. Late in life financial decisions can have a large impact on your retirement, so it’s vital to seek professional financial advice so you fully understand the risks and tax implications of any strategy.

After all, if anyone deserves to make the most of their home – and keep it safe and sound – it’s golden oldies.

Browse and compare home loans below.

Compare refinance home loans - last updated 11 August 2022

Search promoted home loans below or do a full Mozo database search . Advertiser disclosure
  • Smart Booster Home Loan

    2 Year Discounted Variable Rate, Owner Occupier, Principal & Interest, <80% LVR

    interest rate
    comparison rate
    Initial monthly repayment
    3.60% p.a.variable for 24 months and then 4.00% p.a. variable
    3.96% p.a.

    Already includes July RBA rate increase. New super low introductory rate home loan for two years. Min 20% deposit. No monthly or ongoing fees. Fast settlement times. Mozo award-winning online lender. Friendly, local Australian based team.

    Details
  • Unloan Variable

    Owner Occupier, Refinance Only

    interest rate
    comparison rate
    Initial monthly repayment
    3.14% p.a. variable
    3.06% p.a.

    For refinancers only. Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply in as little as 10 minutes.

    Details
  • PAYG Home Loan

    Owner Occupier, Principal & Interest, LVR<80%

    interest rate
    comparison rate
    Initial monthly repayment
    3.29% p.a. variable
    3.33% p.a.

    Low variable rate. Ideal for new home buyers or refinancers. Unlimited additional repayments. Unlimited free redraw. Application completely online. Optional 100% offset can be added for $120 p.a.. 20% deposit required.

    Details
  • Celebrate Variable Home Loan

    <60% LVR, Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    3.79% p.a. variable
    3.79% p.a.

    Fast and efficient online application. Automatic discounts as loan is paid down. Free extra repayments and redraw facility. Zero fees. Min 40% deposit required.

    Details

* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate, loan amount and term entered. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

^See information about the Mozo Experts Choice Home Loan Awards

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.