Why reverse mortgage? Top 7 reasons seniors use equity release loans

by Darren Moffatt on January 17, 2014

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Funny how attitudes change over time.

When I started in the reverse mortgage industry in 2005,  there was a widespread (though misinformed) view that reverse mortgages were ‘evil’ or ‘bad’. That the banks would end up ‘taking’ your home, and that spending the kids’ inheritance was selfish, irresponsible & perhaps even immoral.

Well not anymore!

Frankly, many seniors are now running out of money & have embraced reverse mortgage as a positive option for their future. The demand for equity release finance has grown in recent years with the surge in retiring baby boomers, and a softening of attitudes towards reverse mortgages. Strong regulation by the government has also helped convince pensioners & Australian self-funded retirees that these loans are safe.

So why reverse mortgage? Top 10 reasons seniors use equity release loans are included below. You’ll see that you’re not alone – many thousands of people across Australia are asset rich & cash poor, and face the same problems as you. Here are the main ways they use the money:

1. Home improvements

It’s common for retirees who’ve been on the pension for a while to let the house run down in condition. Using a reverse mortgage loan to do minor renovations & improvements can restore the house and improve it’s capital value. Try this FREE online renovation tool.

2. New car

Every one loves buying a new car, and seniors are no exception.

3. Additional ‘income’

Time and again our customers say ‘…the ‘pension is not enough to live on’ and we agree. What many don’t realise is that you can draw the reverse mortgage funds gradually over time so that, even though it’s your home equity, it effectively serves as additional income. Generally this does not affect the aged pension, though you should always check with Centrelink first.

4. Travel

Fancy a cruise or a trip to to Europe? Many borrowers use their money to fund a wonderful holiday. I have one client who goes to France every year!

5. Aged care & accommodation bonds

Entry into nursing homes often requires the payment of an accommodation bond, which people fund by selling the family home. However, it is possible to avoid a sale & pay nursing home costs & fees with a reverse mortgage loan. You should always consider financial advice for aged care, & we can recommend these financial planners for Sydney people.

6. Medical expenses

On the upside we’re all living longer, but the downside is an increase in medical problems such as knee & hip replacements. Many of these conditions are elective & waiting lists can be very long, so some people opt to  fund these privately via reverse mortgage to improve quality of life.

7.  Help family

It’s understandable that people sometimes like to help family with the money that they get from a reverse mortgage, but CAUTION IS ADVISED. If you are receiving aged pension, you must check with Centrelink regarding the gifting provisions as it could reduce your pension. Equally, if you are being bullied or coerced into giving money to a family member this is not acceptable. You should talk to your lawyer, speak with a financial counsellor, or call ERRMIS to get help.

So there you have it- the top 7 reasons why seniors use equity release loans & reverse mortgages. Hope you have found this useful, feel free to leave a comment or ask a question.

If you wish to discuss options for you, please call  1300 745 745 or email [email protected]

Regards, Darren

Disclaimer: the content of this post is informational only & does not constitute financial advice

{ 1 comment… read it below or add one }

Molly Robson April 11, 2015 at 1:27 pm

Thanks for the useful information. We are in an over 50’s resort (own the house but lease the land) so we are not eligible for reverse mortgage. This is not usually discussed with people when they are purchasing these properties, but it is important to advise them as there is a trend towards resort living in Australia.
We all hope not to run out of money as we age but the cost of living keeps rising!

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