Pay for renovations on the aged pension

QWe need to fix our house. It needs a new kitchen and bathroom – nothing too fancy. As we are only on seniors pensions, would getting a loan from a bank instead of a private lender be better? Have you any suggestions on which to choose from?

Interesting question, Marie, and I know many people on an aged pension will be reading this with interest. And speaking of interest, that is what my answer is all about.

You need the cheapest interest rate you can get from a reputable lender. Let me guess at the cost of a basic kitchen and bathroom – I’m thinking $10,000 to a maximum of $20,000 each. With your senior’s pensions, a bank or similar may well be willing to lend this to you using your house as security. The rate will differ a lot between lenders, so make sure you shop around.

Another interesting option is to go with the Department of Social Services pension loan scheme. This does not provide lump sums, but will lend you 150% of your pension on each pension payment date. It would not take many payment dates to access the amount you need for your kitchen and bathroom. The plus here is that the government charges you 4.5% on the amount it lends to you. No fees and charges apply apart from a valuation and the cost of placing a caveat over your property.

You can continue to take a fortnightly amount to improve your lifestyle and repay it after you leave your property and it is sold. Or you can pay it back at any time.

So, I’d be doing a bit of research. The government option is clearly outlined on the internet and, being a government offer, there are no hidden fees or charges. You know this is available at 4.5%. How does this compare with a private sector lender? Make sure you clearly understand any fees it will charge you, the repayment amounts and the rate of interest.