Jul 31st, 2025

Francis’s Borrowing Power and Strategy to Re-Enter the Property Market in Australia

Estimating Francis’s Borrowing Capacity for Property Investment

Francis, now 80, owns a mortgage-free Perth home valued at $1 million and will have $400 000 in cash from selling an investment property. Below are three ways he could re-enter Australia’s property market.

1. Standard Investment Loan

If Francis uses only his Age Pension ($1 867/month) plus $1 667/month in rental income, his total monthly income is $3 534. Lenders typically allow up to 30% of income for repayments (≈$1 060/month), which supports a loan of about $120 000–$130 000. Together with his $400 000 cash, he could target properties worth $520 000–$530 000.

2. Reverse Mortgage

By drawing up to 20% of his home’s value (~$200 000) via a reverse mortgage, Francis could access around $600 000 in total purchasing power without having to make regular repayments.

3. Cash Purchase

Alternatively, he could use the $400 000 cash to buy a property outright, eliminating borrowing costs and obligations.

Key Considerations

  • Age Restrictions: Most lenders require loans to mature by age 70–75, limiting conventional options for an 80-year-old.
  • Income Limits: Only Age Pension and rental income count toward serviceability.
  • Equity Leverage: His $1 million owner-occupied home provides strong security for any loan.

Recommended Strategy

  1. Use cash as a deposit or for an outright purchase.
  2. Explore reverse mortgage products to access additional equity.
  3. Focus on Perth properties in the $400 000–$600 000 range with 4–5% rental yields.
  4. Consult a mortgage broker who specializes in senior lending.

With his solid equity and clear plan, Francis can re-enter the market by selecting the right lending option and investment-grade property. For tailored advice, visit Investor Profile.

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