Downsizer Home Loan Guide for Australians 55+

Downsizing is a significant life decision — and a financial one. Whether you’re looking to free up cash, reduce maintenance, or move closer to family, selling the family home and buying something smaller comes with unique financial considerations. This guide explains everything Australian downsizers aged 55 and over need to know about home loans, super contributions, and retirement-friendly finance options.

What Is a Downsizer Home Loan?

A downsizer home loan is simply a home loan taken out when purchasing a smaller, lower-value property after selling a larger family home. In many cases, downsizers can purchase their new property outright from the proceeds of their sale — but some choose to retain a small mortgage to preserve cash flow or to keep funds invested.

The key difference from a standard home loan is that lenders must assess your income differently at retirement age, typically relying on superannuation income streams, investment income, rental income, and the Age Pension rather than wages.

The Downsizer Super Contribution: $300,000 Per Person

One of the most significant opportunities for downsizers is the Downsizer Super Contribution, which allows Australians aged 55 and over to contribute up to $300,000 per person ($600,000 per couple) from the proceeds of selling their home directly into superannuation — outside of the normal contribution caps.

Key eligibility criteria include:

You must be 55 or older at the time of making the contribution
The home must have been owned by you or your spouse for at least 10 years
The property must have been your main residence at some point
You can only make this contribution once in your lifetime
The contribution must be made within 90 days of settlement

This is a powerful strategy for boosting your retirement nest egg in a concessionally taxed environment (15% within super) rather than holding funds in a bank account taxed at your marginal rate.

Right-Sizing Your Mortgage in Retirement

Many downsizers find that after selling a $1.5–2 million family home and buying a $700,000–900,000 apartment or townhouse, they have significant surplus funds. The decision of whether to carry any mortgage at all depends on your broader financial strategy:

No mortgage: Peace of mind, no repayment obligations, simple lifestyle
Small mortgage: Frees up capital to invest in income-producing assets or top up super
Interest-only mortgage: Minimises monthly outgoings while preserving capital flexibility

There is no universally correct answer — it depends on your asset base, income needs, tax position, and risk tolerance. A mortgage broker working alongside your financial planner can help model the right structure.

Age Restrictions on Borrowing

Australian lenders do not discriminate based on age under the Age Discrimination Act 2004, but they are required to assess your ability to repay the loan. For borrowers over 60, this typically means:

Demonstrating a clear and credible exit strategy (e.g., sale of assets, super drawdown, or downsizing again)
Proving sufficient income from non-employment sources (super pension, investment income, rental income)
Loan terms may be shorter than the standard 30 years

Most lenders will lend to borrowers in their 60s and 70s provided the exit strategy is sound. Some lenders are more comfortable with retiree borrowers than others — a broker can identify the right lender for your situation.

Retirement Income Assessment

If you are drawing a superannuation income stream, lenders typically accept this as assessable income. The assessment methodology varies by lender:

Some lenders “gross up” super income by a factor to account for its tax-free nature in retirement
Rental income from investment properties is commonly accepted (with a 20–25% discount for vacancy and costs)
The Age Pension may be accepted as supplementary income, not typically as primary serviceability income

Reverse Mortgages: An Alternative for Asset-Rich Retirees

A reverse mortgage allows homeowners aged 60 and over to borrow against the equity in their home without making regular repayments. Interest accrues and is added to the loan balance, which is repaid when the property is sold (typically upon death or moving to aged care). Key points:

Maximum initial loan-to-value ratio is typically 15–25% at age 60, rising by 1% per year
The “no negative equity guarantee” means you can never owe more than your home is worth
Interest rates are typically higher than standard mortgages
Reverse mortgages can affect your Age Pension entitlements

This product suits retirees who are asset-rich but cash-poor and do not wish to sell. It is not typically used by active downsizers who already have sale proceeds available.

Frequently Asked Questions

Can I get a home loan after 60?

Yes. Australian lenders cannot discriminate based on age, and many lenders actively serve retiree borrowers. The key requirement is demonstrating a credible source of income (super pension, investments, rental income) and a clear exit strategy for repaying the loan. A broker experienced with retiree lending can match you with the most suitable lender.

What is the downsizer super contribution?

The downsizer contribution allows Australians aged 55 and over to contribute up to $300,000 per person ($600,000 per couple) from home sale proceeds into superannuation — outside the normal contribution caps. The home must have been owned for at least 10 years and the contribution must be made within 90 days of settlement. This is a once-in-a-lifetime benefit.

Do I need a deposit if I sell first?

If you sell your family home first, the proceeds effectively serve as your deposit (and in many cases pay for the new property outright). If you need a small mortgage, most lenders require at least a 20% deposit to avoid LMI — but as a downsizer with substantial sale proceeds, this is rarely an issue. The more important question is how to structure any remaining mortgage for tax and cash flow efficiency.

Get Expert Advice from Lagos Financial

With close to 20 years of experience and access to 60+ lenders, Victor Lagos and the Lagos Financial team can help you find the right loan for your situation. Book a free assessment or call us to discuss your options.

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About the Author
Victor Lagos is a licensed mortgage broker (ACL 546774) and founder of Lagos Financial, with close to 20 years of finance industry experience since beginning his career at Bluestone Mortgages in 2006. A member of the Finance Brokers Association of Australia (FBAA) since 2015 and the Australian Financial Complaints Authority (AFCA — 98399), Victor helps Australians build wealth through tailored home loan and property investment strategies, working with 60+ lenders nationwide. Last reviewed: March 2026.

Downsizer Home Loan: Finance Guide for Australians 55+