Reverse Mortgage Demand To Rise, Thanks to Government?

by Darren Moffatt on September 8, 2014

  • Sumo

There are media reports that many senior Australians are now starting to worry about government’s plans for the aged pension and Newstart Allowance revealed in the recent budget. As the Federal Government announces new schemes as part of its $5.1 billion employment service program the unemployed may soon be forced to apply for 40 jobs a month to qualify for unemployed benefits.

With over 200,000 Australians aged over 50 relying on the dole, this will greatly affect them and hurt their cash flow if they are pushed to move off welfare.

These employment and welfare changes are meant to encourage people to actively seek jobs and eventually move out of welfare. They are also setting aside over $480 million wage subsidies for companies to employ mature age workers. Although a worthy idea, sadly it won’t be enough. Older people are experiencing serious employment barriers and unless real training and re-skilling happen, it’s hard for them to get a job.

Age discrimination exists. If older people have no chance of getting new jobs or do not have enough unemployment benefits, what will they do?

Regrettably, a reverse mortgage may be one of the few viable options available for the many people in the community who were not expecting such drastic changes to the system. Although borrowers must be 60 years to qualify, it seems likely the demand for reverse mortgage will rise if the government manages to legislate the new changes through the senate.

If you are older and worried about getting through a period of unemployment without government assistance, a reverse mortgage may assist with the following:

1. Additional income – Reverse mortgage finance allows you to draw on your home equity which can effectively serve as additional ‘income’ and help you with daily expenses.

2. Fund for re-training – If you really want a job but you don’t have the necessary skills to get hired, you may want to consider training and acquire new skills. Reverse mortgages can find this.

3. A new car or business van – If you need a vehicle for job interviews or to travel to where the work is, a reverse mortgage loan can help.

4. Pay for debts – If your are struggling to pay other debts from your cash flow it is possible to consolidate these into a reverse mortgage that does not require monthly repayments (the interest is capitalised and the total debt plus accumulated interest can be paid later from the sale of the house or when you pass away).

There are lots of other uses for equity release loans; you can actually use it for pretty much anything you want. But if you are still reasonably young (say under 65) it is always better where ever possible to work or obtain another source of income before drawing down on your home equity.

Unfortunately, the government seems intent on making life harder for many seniors who are under unemployment benefits and not getting a fair chance on new employment opportunities. If you find this post helpful or have some opinion on the government changes in the budget, please let us know in the comment section.

Regards, Darren

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