Until recently it was very difficult for retirees to borrow money for investment properties or indeed for their own homes. This was because most lenders wanted them to be earning an income, either a job (which they by definition don’t have) or rental income or dividend income.
Recently we discovered a lender that will recognise the income you are or will be taking from a superannuation income stream (also called a pension, not to be confused with the governments Aged Pension).
We have written loans for several clients who were looking to buy investments for themselves, fix them up a bit and put them onto Airbnb.
In these situations the clients had significant holdings in super, but would not have been able to meet the servicing criteria without acknowledgment of their superannuation incomes. Rather than pull money out of their super they thought it made more sense to borrow the money at a low interest rate (their interest rates had a 2 at the front).
The interest costs would be a tax deduction as well. The loans were Principal and Interest and had shorter terms – though one was for 25 years, which shows the lender that there is a plan to repay the loan. These days Principal and Interest loans are often significantly cheaper than Interest Only loans, so in many cases the interest saving defeats the maintenance of a tax deduction.
Their is only one lender that we know of that will do this – this highlights the benefit of using a mortgage broker like us – we can do deals that a single lender may not be able to do.
Seek advice from your financial adviser before taking action as this may not be the right strategy for you.