

Bridging loan for retirees
Bridging loans are short-term loans that help homeowners buy a new property before selling their current one. For retirees, they offer a way to secure a new home without the stress of waiting for a sale.
Retirees might use a bridging loan to downsize, move closer to family or manage cash flow during a move. But financing can be challenging, especially when your income comes from pensions, superannuation or investments.
What is a bridging loan and how does it work for retirees?
A bridging loan is a short-term loan that helps cover the gap between buying a new property and selling an existing home. For retirees, this allows you to purchase a new home without needing to wait for the sale of your old property.
Interest on a bridging loan is usually charged in two ways:
- Capitalised interest: Unpaid interest is added to the loan balance, so you don’t make repayments during the loan term.
- Repayments: You make regular interest repayments during the loan term.
These loans typically last for six to 12 months, giving you time to sell your home without rushing.
Why might a retiree need a bridging loan?
There are several reasons you might need a bridging loan as a retiree:
- Downsizing: A bridging loan can help you buy a smaller, more manageable home before selling your larger family home.
- New purchase before sale: Secure a retirement home without waiting for your current home to sell.
- Cash flow management: Access funds for settlement, moving costs or minor renovations before your old property sells.
In some states, you might be eligible for certain concessions when buying your new home. This can reduce the overall cost of purchasing your new property. Eligibility varies, so check with a broker or state government website.
Eligibility for bridging loans as a retiree
To qualify, retirees must generally meet these criteria:
- Income source: This could be from a pension, superannuation or other investments. These are assessed to ensure you can service the eventual repayment of the loan once the old property sells.
- Assets and equity: Your existing property and other assets will be considered as security.
- Credit history: A good credit history is important for approval.
Your lender will also need to see that you have a clear exit strategy. This means that you have a plan for selling your existing property, including your expected price and timeframe.
Pros and cons of bridging loans for seniors
Advantages
- Smooth transition between homes
- Secure your new home quickly
- Avoid the need for temporary rentals between properties
Disadvantages
- Interest can accumulate if your interest is capitalised
- A delayed sale may lead to pressure to repay the loan
- Potential for higher repayments if the sale price of your old home is lower than expected
Need help with bridging loans? If you’re a retiree considering a bridging loan, talk with a Loan Market Connect broker for expert advice.
Alternatives to bridging loans for retirees
If a bridging loan does not suit your circumstances, there are other ways you can buy your new home:
- Sell your old home first: This avoids the need for a bridging loan.
- Access equity (like through a reverse mortgage): While not a direct substitute, equity release can provide access to funds using the equity in your home, although it operates differently from a bridging loan.
- Use savings or other investments: For those with enough funds, this can be a safe option.
Applying for a bridging loan: What to expect
The application process for a bridging loan generally involves:
- Submitting an application with your personal and financial details.
- Providing supporting documentation, including proof of identification, proof of income, property valuations, sales contract for the new property and an estimated sale price for the old property.
A mortgage broker can play a valuable role in understanding the options available to you and guiding you through the application process. They can help you understand the terms and conditions and find a loan that suits your situation.
FAQs about bridging loans for retirees
Can pensioners get bridging loans?
Yes, but lenders will assess income sources such as your pension or superannuation.
How long can I have a bridging loan for?
Typically six to 12 months, depending on the lender.
What happens if my old home doesn’t sell on time?
You may need to extend the loan or explore alternative financing options.
Are bridging loans expensive?
Bridging loans can be pricier than standard home loans due to the capitalised interest and potential fees.
Sources:
https://www.revenue.act.gov.au/home-buyer-assistance/pensioner-duty-concession/concession-scheme
https://www.nerdwallet.com/au/home-loans/what-is-capitalised-interest
https://www.nab.com.au/personal/life-moments/home-property/buy-next-home/bridging-loans