Marguerite Taylor February 27, 2017 No Comments

How Reverse Mortgage Helps Fund Aged Care at Home

Many Australian seniors would prefer to stay at home during retirement instead of moving into an aged care facility. If you’re eligible for a Home Care Package but you just need some help with your added expenses or other necessities to ensure comfortable living, a home equity loan might be able to provide a valuable assistance.

Are You Eligible for a Home Care Package?

In general, the Australian government will assess your eligibility for a home care package. And once you are assessed as eligible, you will receive a letter of approval from My Aged Care, which contains the level of home care package that you will receive. You will also be placed in a national priority queue for home care packages. Someone will also keep in touch with you to inform you when a suitable package is already available.

While waiting for your home care package, you can begin searching for accredited home care providers in your area and work on the numbers. Remember, not all providers are the same, so you must meet them to level your expectations. This is also a good chance to see the available services that they can offer.

[Related Post: Use your Home to Stay at Home]

Your Home Care Package May Not Be Enough

Once a home care package becomes available, My Aged Care will inform you about the details of the services. There’s a possibility that the Home Care Package assigned to you may not be enough for your retirement.

Remember, the government subsidises aged care services in Australia. And depending on the results of your assets test, you might be expected to contribute towards the cost of your home care. The cost that you will have to shoulder will depend on the package or funding program.

Meanwhile, your provider may also ask you to contribute towards the cost of the services you receive. Hence, if you have been assessed as capable of contributing to the cost of your services, you should do so before receiving the home care services.

Your home care service provider may ask you to pay the following:

  • An income-tested care fee (depending on your retirement income)
  • Basic Daily Fee of up to 17.5% of your age pension

While commendable, the Home Care Package may not be enough especially for seniors with reduced income. Many seniors who have already stopped working and don’t have enough fund on their super may find it difficult to make ends meet. Plus, the cost of retirement living can be high as you have to pay for medical expenses and home renovations to allow easy and comfortable living.

Luckily, there are alternative financial solutions available for seniors who are assets rich but cash poor. One of these alternatives is the home equity loan also known as reverse mortgage loan.

What is a Reverse Mortgage and How It Can Help Seniors?

Many Australian seniors have worked hard for years and paid off their mortgage, which comprises much of their wealth.

[Related Post: EXPLAINER VIDEO – Australian Reverse Mortgages]

Through a reverse mortgage loan, a senior can unlock that wealth – not all of it – but a portion can be used to finance retirement needs including paying off counterpart for home care services. However, seniors can use the loan proceeds in anything they want like paying off their debt, renovating home, or even paying for a holiday.

One great feature of a reverse mortgage is that you don’t have to move out from your home, which makes it a great match for supplementing a home care package.

Consult A Reverse Mortgage Broker Today

Retirement is a crucial phase in life, so it is vital that you consult with an reverse mortgage broker about your finances. For face-to-face financial consultation, or if you want to know more about how you can use a reverse mortgage loan, you can call Reverse Mortgage Finance Solutions at 1800 001 020. You can schedule an appointment with our loan experts who will go the extra mile by visiting you at your home.

Regards,

Marguerite

The consumer’s perspective


We tested consumer perspectives with a group of over a thousand people aged 50 and over. These consumers seem somewhat optimistic about the lifestyles that await them in retirement despite our research findings on the scale of under-funded pensions, including 70% of them expecting to travel in retirement, 30% of them seeking to help their children financially and 22% of them planning to pay off their mortgage.

Overall their expectations of required retirement income was realistic, being typically two thirds of salary. However, three quarters had either not done any planning for retirement or not refreshed their plans for a number of years. Despite this, half were confident that they would have sufficient income in retirement, with 70% expecting their non-pension saving to provide at least a fifth of their income, with half expecting to use the value in their home to boost their retirement income.

For those who did expect an income shortfall in retirement, this was an average of £11,400 per annum. Aside from continuing to work, down-sizing was seen as the most likely option and the average respondent thought that just over £100k could be raised from their home. There was an expectation amongst some that they would receive much more income than current annuities or drawdown can facilitate. This re-enforces our observation that for many people, down-sizing alone will not meet the income shortfall and additional saving is required.

Of note was the group’s hostility towards using equity release. Only 14 people (out of the thousand) were planning to use equity release as a means of boosting retirement income. For those that subsequently realised that they may have an income shortfall to address, only 6% would use equity release. Whilst 80% were aware of equity release and two thirds claimed to understand it, collectively they only managed to answer on average 3 out of 13 true or false questions correctly on equity release, indicating a significant lack of understanding. Whilst we are not advocating equity release as a solution, it may be appropriate for people that need to access capital from their home and for whom down-sizing is not the best option. It is therefore important for these people that their lack of understanding of how equity release works be addressed.

Regards,

Paul Dwyer

Reference:

TISA (2016) Can housing wealth save the day? 752 Durham, North East England Preston Farm Business Park
http://www.tisa.uk.com/publications/752_Canhousingwealthsavetheday-Final24November2016.pdf

Marguerite Taylor January 16, 2017 No Comments

YOU CAN RECEIVE A CONSTANT INCOME FROM YOUR INVESTMENTS!


Read this article and then send it to your Financial Planner.

Most people who rely on investments for their retirement income suffer from varying levels of investment returns, resulting in fluctuating levels of income.

For example, a couple with $30,000 in the bank and $600,000 invested in Australian Shares may have earnt $118,200 in 2013 and seen that figure plunge to $22,800 in 2015! (All Ordinaries Index yearly return  – 2013 Av. 19.7% – 2015 Av 3.8%– source *Market Index Australian Sharemarket Historical Returns Report).

That same couple will also experience a significant reduction in the part pension eligibility as a result of the changes to the Pension Asset Thresholds, effective 01/01/2017.

An easy way for investors to maintain a constant level of income during their retirement is to establish a Stand-By Reverse Mortgage loan. In the above example the average annual return on Australian shares in 2013 was 19.7% whilst in 2015, it was only 3.8%

By using a Stand-By Reverse Mortgage loan, you and your Financial Planner can identify a minimum level of return you need to maintain your lifestyle. For example, if the above couple established 7% p.a. as a minimum level of return, this equates to an income of $42,000 p.a.

In the 2015 year, they would have earned $22,800.00a shortfall of $19,200!  Using a Stand-By Reverse Mortgage loan, they would have drawn this amount from their Stand-By Reverse Mortgage loan.

In the 2013 year, they would have earned $118,200. They would have retained their $42,000 annual income and paid the balance into their Stand-By Reverse Mortgage loan, to offset any amounts drawn in previous years. Because 2013 was such a strong year, they may have drawn some of the surplus funds and gone on a trip or upgraded their car etc.

The Stand-By Reverse Mortgage loan can be drawn against at any time, for any purpose and repayments of any amount can be made at any time, without penalty.

These features make it an excellent tool for retirees to have in the background of their retirement strategy, to make up any shortfall in annual investment incomes and also, to replace the need for them to maintain large cash reserves.

Reverse Mortgage Finance Solutions are specialist Equity Release Credit Advisors and can assist your Financial Planner to establish a Stand-By Reverse Mortgage loan  to underwrite your annual income levels and provide access to extra cash, as and when required.

Go to our web-site for contact details for your local, State based advisor. www.reversemortgagefinancesolutions.com.au or contact us on 1800 001 020

*Historical returns are based on the All Ordinaries Accumulation Index (XAOA) which includes dividends

Peter Bolitho. Director – Seniors Equity Release Australia; Reverse Mortgage Credit Advisor.