Advice about clearing debt upon retirement outdated, says broker
AFG Securities is on a mission to become the preferred lender for older Australians, releasing an interest-only refinancing mortgage for mature age borrowers.
AFG Securities, broker aggregator Australian Finance Group Ltd’s non-bank lending business, launched AFG Home Loans Retro Thrive earlier this month, offering interest-only loans for over 50-year-olds refinancing existing investment debt, with a loan term of up to 40 years.
AFG Securities general manager Damian Percy (pictured above left) said through the course of engaging with mature aged borrowers, who typically faced lending restrictions because of their age, his team had identified an important segment of the market whose needs were not being met by the banking sector and other lenders.
Nathan Smith (pictured above right), whose brokerage Birdie Wealth was a joint winner with Home Loan Experts of the Gateway Bank Best Customer Service From An Individual Office award at the 2023 Australian Mortgage Awards, and awarded as Best Mortgage Companies to Work for in Australia, said older borrowers were looking for ways to maximise investments as life expectancy and retirement ages grew.
“There is a market not being serviced, innovative products are required to fulfill the needs of this growing market,” Smith said.
Smith, who established his Sydney business Birdie Wealth in 2017 and has seven mortgage brokers on his team, said the old advice about clearing debt upon retirement was outdated.
Smith said his team predominantly dealt with mum and dad investors from throughout the Sutherland Shire, and more borrowers were entering their 50s with loans for investment properties and the purchase of shares.
“The advice nowadays is more sophisticated and often involves borrowing beyond retirement age as part of the strategy,” he said. “Borrows who are 50-plus are looking for a `set and forget’ product where they no longer need to reapply for extensions on their interest-only period.”
“They find the process of reapplying every five years tedious and unnecessary.”
Percy said many mature age borrowers with a portfolio of investment properties were being forced to pay principal and interest on investment properties with very low loan to value ratios (LVRs).
“This is at odds to what they are striving to achieve at that stage in their life – which is to prioritise cash flow from the income produced by their investment properties, rather than further reducing their debts,” he said.
“The feedback we’ve received is that these borrowers have already done the hard yards to reduce LVRs to very low levels and were frustrated that they were being forced to make higher repayments to further reduce their debt at a time when their needs and objectives are about maximising their retirement, or pre-retirement, available cash flow.”
Percy said AFG Home Loans Retro Thrive could give mature age borrowers with low-debt investment portfolios what they needed at that stage of life, whilst ensuring the credit risk was sound and their long-term objectives were met.
AFG Home Loans Retro Thrive is available for refinances on a dollar-for-dollar basis, with up to 65% LVR and borrowers only pay back the interest each month.
“This may assist them to free up some of their cash flow to spend on the things they’ve worked hard for over the years such as holidays, or home renovations,” Percy said.
For every mortgage written by AFG – including the new AFG Home Loans Retro Thrive – a native tree will be planted in Australia, in partnership with Carbon Positive Australia.
AFG Home Loans Retro Thrive is available to customers of AFG Home Loans, via the AFG broker network.
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