Nicholas Taylor No Comments

Loan Scenario of the Week (11/08/2023)

Thomas (aged 84) and his wife Florence (aged 85) live in their unencumbered home in the Sydney Hills District. Thomas has just fully retired and closed his business which he had been operating part time.  

Florence recently had a fall and Thomas has also found it difficult to come inside and up the stairs from the garage. As a result of this they have decided they want to install a lift in their home. They have done research and the cost is likely to be around $70,000 to $80,000.00. 

Their car is over 15 years old, so they are considering replacing it.  Thomas has a credit card with a balance of around $15,000. He would like to use funds from the Reverse Mortgage to pay this balance off. As they use it for a lot of transactions, they do not want to close the credit card. 

Then they want to have a credit line available for one off contingent events or discretionary spending such as travel. Having funds available will also mean they can pay for aged care assistance in the home if they need it in future. 

They have 7 children who are all financially independent. If necessary the property could be sold to pay for aged care if needed, but the children are also committed to helping their parents stay at home for as long as possible. The funds are not for regular expenses but for one off expense including discretionary spending (such as the adding of the elevator.) 

(Names, locations, amounts, & other personal details have been changed to protect the client’s identity.)

Nicholas Taylor No Comments

Loan Scenario of the Week (28/07/2023)

Lyndall (74) lives with her husband George (80) in the house in the Blue Mountains. George has dementia, and Lyndall has signed on his behalf as a Power of Attorney.

This loan is to pay off several debts that have built up over time. This is because the costs of living and the extra expenses to look after George has pushed the couple to living right on line of their pension incomes. They have 2 financial arrangements from when they were retiring that they have been paying off for over 10 years.

Lyndall has taken out a Reverse Mortgage to pay out these debts, and have some additional funds to supplement their pension income and money for one of large expenses. Lyndall is also worried that they could incur further large expenses in caring for George. The Reverse Mortgage will make funds available for this purpose.

This loan has given Lyndall great peace of mind in an already difficult time, she can now concentrate on caring for George and not having to worry about their finances.

(Names, locations, amounts, & other personal details have been changed to protect the client’s identity.)

Marguerite Taylor No Comments

Are you considering a home reversion scheme?

For seniors investigating their options for finance during their retirement, home reversions schemes might come up as a potential option.

A Home Reversion Scheme is not a loan but is more accurately described as a real estate transaction – you are selling a portion of your home. The transaction does not come under the Credit Act and its consumer protections.

Home reversion schemes in Australia are only available in Sydney and Melbourne and even then not in all postcodes.

It is a part sale of a future share of the sale proceeds of the home, at a discounted rate against its future value. The amount the Home Reversion Scheme owner actually receives of the original percentage when the home is sold, varies over time and depends on sale price – sounds complicated? Yes, it is.

An example

A 70yo female seeking to access 10% of her home valued at $500,000 (ie $50,000) will be asked to sell the Scheme a substantially larger portion of the future value of her home.  The percentage actually payable at the time of the subsequent sale of the property is subject to many variables and potential outcomes, although limited to the actual proportion sold, can be hard to forecast.

Reversion schemes offer lump-sum funding only.  Although lump sums are available via a reverse mortgage our experience is that most people (in excess of 90% of our clients) want not only a lump sum but also to set aside funds for future use by way of line of credit and/or a regular income stream for a predetermined period of time.  These options can be set up at the time of the initial application and eliminate the need to reapply to the lender for more funds later.

This flexibility is also important as it relates to overall costs as interest on a reverse mortgage is calculated on the amount drawn. So, if you don’t want all the available funds upfront the overall interest expense will be lessened by taking it as you need.

It is worth noting that Home Reversion Schemes may offer a higher lump sums than the amounts allowed by a Reverse Mortgage lender.

In our opinion, a Reverse Mortgage compared to a Reversion Scheme can provide you with more flexibility and options to meet your long term needs.

Are you interested in finding out your finance options in retirement? Contact us today for a discussion with an expert who can listen to your needs and find the right solutions to fit.