Over 55s Village Mortgage
Finance for over 55′s villages / Sepp 5
As the Australian population ages, there is an increasing demand for assisted living & independent living complexes specifically designed for over 55′s. These housing communities have been promoted by the state government, in particular in NSW under the Sepp 5 zoning.
Generally these properties are specifically designed for the needs of pensioners or older couples and often include features such as ramps, low maintenance gardens, excellent public transport and nearby medical facilities. Some assisted living complexes also contain additional services such as meal deliveries and community activities.
The complexes are restricted such that only people who have a disability or who are over the age of 50 or 55 may live in the unit or house. There has been concern that in some NSW complexes this is not legally binding & so they are often leased out to normal tenants.
Unfortunately many banks do not accept Sepp 5 / over 55 villages as security for a home loan or investment loan. Read on to find out how you can get approved for a loan to finance a property in a retirement community.
How much can you borrow?
Sepp 5 zoning (NSW): You can borrow up to 80% of the value of the property. In rare cases, you may be allowed to borrow up to 90%.
Over 55′s villages: You can borrow up to 80% of the value of the property depending on how specialised the property is and what restrictions there are on the resale or leasing of the property.
Low doc loans: Not available.
No title / leasehold properties: It is not possible to finance these properties except in the ACT.
Discounts: Competitive professional package and basic loan discounts are available. It is rare that our customers pay a higher rate because they are buying an investment in an independent living village.
Note: Very few lenders consider these retirement communities to be acceptable as security for a home loan. Please enquire online to talk to a mortgage broker who specialises in financing over 55′s housing.
What are the approval criteria?
The lenders will take several factors into account when assessing your loan application:
- Investment / Owner occupied: Lenders prefer to lend to investors buying in these complexes. The reason being is that if you are buying the property and intend to live in it then you are likely close to retirement age. You will need to prove to the lender that you can repay the loan before you retire (assumed at age 65).
- Lease restrictions: Are there restrictions such as a long term lease that is registered on the title of the property? Can the property be leased to people under 55 years old? These factors are taken into consideration.
- Sale restrictions: Some complexes can only be sold to someone who is over the age of 55 or have specific rules governing the sale of the property. Lenders see such restrictions as very unfavourable from a lending point of view.
- Assisted living / Independent living: The banks will look at how specialised the property is. Their preference is for the property to be as close to a normal home or unit as possible.
- Self contained: Lenders prefer units or houses that are self contained, i.e. they do not have communal laundry facilities, bathrooms or kitchens.
- Zoning: State Environmental Planning Policy Number 5 (Sepp 5) is considered to be a favourable zoning, other zonings are considered on a case by case basis depending on what restrictions they impose on the owner and the bank.
- Exposure limits: Each lender will limit the number of units or houses that they will finance in any one community. Typically once they have lent to over 20% of the houses in the development then they will decline all future loan applications.
Why are the banks so conservative?
The banks are concerned that it may be more difficult to sell these properties if the need arises. As a result most lenders will not lend for them at all, and other will restrict the amount you can borrow so that their risk is reduced.
For the most part these concerns are unfounded. The majority of complexes have few restrictions and are in high demand due to their excellent rent returns which are often linked to increases in the CPI or pension rates.
The demographics of the Australian population are shifting towards an aged population as the baby boomers retire. It is difficult to see how these properties will not be in high demand for the foreseeable future.
Do you need help from an expert?
Our mortgage brokers are specialists in helping people to buy an investment property in a seniors living / over 55′s housing development. If you are having trouble financing your investment then please enquire online and one of our brokers will call you to discuss your options.