A home loan used to set you up for retirement, but now many Australians face working beyond retirement age or retiring with significant mortgage debt. As home buyers get older and rising house prices and living costs require bigger mortgages, "forever loans" are becoming more common. This shift in how Australians view mortgages requires new strategies like rent-vesting or buying with family or friends, while financially preparing for retirement is essential in this challenging landscape.

Buying property later in life

In Australia, and in many parts of the world, first home buyers are entering the market much later in life. Where previous generations typically bought homes in their late 20s or early 30s, today’s buyers often wait until their mid-30s or even later. Driving this shift in dynamics are factors like rising house costs, changing lifestyles and economic circumstances.

Buying property later in life means that many homeowners will still be paying off their mortgages well into retirement, leading to the rise of "forever loans” - mortgages that are never fully repaid because there simply isn’t enough time before retirement. With national home values rising to record levels, some home buyers have found creative ways to get into the market.

Rent-vesting - renting where you want to live, buying where you can afford to - is one of the strategies proving popular amongst home buyers who want to invest in their future without foregoing their lifestyle. Co-buying is another strategy and an option for some first home buyers - pooling resources with family or friends to boost purchasing power and tackle affordability issues that are stopping many first home buyers and solo buyers from entering the market.

Entering retirement with mortgage debt

According to results from How Australia Retires, in a survey of 1,800 people aged over 18, 45% of those born between 1996 and 2010 believed they'd still be paying off their mortgage by the time they were ready to retire, while 32% of those born between 1966 and 1980 also expected to still be paying off their property loans in retirement.

Close to half of respondents intended to keep paying off their mortgages in retirement, while a quarter planned to use their superannuation savings to wipe out the debt in one hit. Others said they would consider selling their mortgaged home and repaying the debt when they retire.

Regardless of age or income, working-age Australians should prepare for retirement with a financial plan that outlines a monthly budget to live within your means, and prioritises savings in Superannuation or other long-term investments. Another important step is working with a financial consultant to determine the type of lifestyle you require in retirement and, most importantly, how to achieve it.

Financially prepared for home ownership

Whether you’re an existing homeowner planning for retirement, or a first home buyer preparing for home ownership, get financial and mortgage advice tailored to your circumstances and lifestyle.

Contact Mortgage Express today to connect with a mortgage broker or finance consultant near you and find out if investing in property, rent-vesting – buying a property to rent out with the expectation that it will increase in value to provide the deposit you need to buy a home to live in – or co-buying property with family or friends is right for you.

While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Finservice Pty Ltd (Mortgage Express) for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication. A Disclosure Statement is available on request and free of charge.

Finservice Pty Ltd (Mortgage Express) is authorised as a corporate credit representative (Corporate Credit Representative Number 397386) to engage in credit activities on behalf of BLSSA Pty Ltd (Australian Credit Licence number 391237) ACN 123 600 000 | Full member of MFAA | Member of Australian Financial Complaints Authority (AFCA) | Member of Choice Aggregation Services.