Blog

Reverse Mortgages often have a reputation for eating up a family’s equity and diminishing your child’s inheritance. This is a concern for clients when taking out a Reverse Mortgage, however, we have found in the current Australian property market when used responsibly, the opposite is true.

We recently heard from a client in the Northern beaches. This couple took out their first Reverse Mortgage in 2007, they have done several refinances since. In 2007 their house was worth $750,000, and they had a choice to either sell and buy in a retirement village for $500,000 or take out a reverse mortgage to supplement living costs. If the had of sold and bought in the retirement village, they would of had $200,000 left to put in the bank after all other fees and charges. Over the next few years, they would have had to lived off the pension and savings. Once the savings had run out, they would have been left to scrimp and save as you cannot get finance on a retirement village property. They would have only been able to leave their children the $500,000 from selling the retirement village property.

Fortunately, the couple chose to do a Reverse Mortgage. The couple have now spent $215,000 on their Reverse Mortgage facility, taking a thousand a month to supplement income and drawing down covering one off large expense. They have accrued interest of $275,000 for a total cost of $490,000. This alone sound expensive, but their property is now worth over 2.5 million dollars, and they have enjoyed a far higher quality of life.

The clients’ children will now go on to inherit over a million dollars each instead of having the split half a million dollars between the two of them.

For more information on how a Reverse Mortgage can help you please call our Reverse Mortgage Specialist in your state.

Mr F (aged 80) and Mrs F (aged 73) live in their unencumbered home in the Sydney Upper North Shore. They have lived there for 34 years.

Mr F was an engineer, he has retired completely now, and Mr & Mrs F receive the full Centrelink aged pension.

Mr and Mrs F have an investment that has been performing badly since Covid started and so an expected income has not materialised from it.

They have a yacht worth around $300,000. They want to be able to keep using the yacht regularly. They have done considerable travelling around Australia and the world and now look forward to using the yacht.

They have one outstanding liability which is a result of Mr F’s accountant making an incorrect claim for Covid assistance. This is being paid off by a $1,000 payment each month for the next 10 months.. This is reducing their available cash flow for living expenses.

The F’s are planning to use their Reverse Mortgage as a credit line to supplement their income so they can maintain their lifestyle and continue using their boat. They will also do some travel around New South Wales and Australia. They are getting a loan facility of $270,000.00 which they will draw down as they need.

They expect the requested loan to last them for their lifetime. The pension pays their necessary living costs. The reverse mortgage funds are more for their discretionary spending such as the boat use and some travel.

This loan has allowed the F’s to continue enjoying their current lifestyle and the results of all their hard work over the last 50 years.

(Client Names, Ages and Locations have been changed to protect our clients confidentiality.)

Mr and Mrs N have lived in their house in the Sutherland Shire for over 40 years. Unfortunately, Mrs N has recently been diagnosed with dementia and has taken a steep decline in her mental state. This has meant that she can no longer stay at home and has gone into Aged Care. Mrs N’s pension is now going to her aged care costs, but there is still a shortfall in the payments. Mr N is also having trouble paying his own living costs and maintaining their house. Mr N is still in perfect health and wants to live in their family home for as long as possible. They have received financial advice from an Aged Care Finance Specialist and a Reverse Mortgage has been identified as the best option.

To pay the Mrs N’s accommodation costs and ensure that Mr N has enough money to survive, they have opted to take out a Reverse Mortgage facility of $250,000.00. This has been set up to release $3000 per month for 5 years to pay Mrs N’s accommodation costs and supplement Mr N’s cost of living. They have also set up a cash reserve of $70,000 this is in case Mr N has any surprise expenses.

This Reverse Mortgage has achieved a great outcome for the family. It has ensured that Mrs N receives the proper care she needs. It has provided Mr N a great amount of relief as he knows his wife is being taken care of and he has eliminated his financial worries. It has also provided relief to their children who signed the Reverse Mortgage as their mother’s power of attorneys now do not need to worry about their parents’ financial situation.