An increasing number of senior Australians commencing retirement have an existing mortgage or other debt. And some lucky enough to have built up their superannuation are using part of the super to pay out that debt.
But those retirees who were self-employed may not have been able to use the existing superannuation system to build an amount which can pay out any outstanding debt.
Earlier this year I was asked to assist two professional men who were servicing existing debts with part-time employment, but were about to commence full-time retirement.
Each situation had a similar pattern. Both were married and the husbands were aged in his mid 70’s had a successful business, put three children through tertiary education, and had continued to buy owner occupied property which had increased significantly over the years. Both had existing mortgages in excess of $300,000.
As a Senior’s Credit Adviser, I had to consider the following aspects of a Reverse Mortgage, and whether it was suitable for their needs.
- Could the existing debt be paid out
- Could an additional drawdown be possible to meet lifestyle needs
- Would there be sufficient equity for possible aged care funding
- Would there be sufficient equity for the beneficiaries.
Each of these questions should be mandatory considerations, particularly when assessing the possibility of one partner predeceasing the other.
Whilst there was differing values in the owner occupied homes, the amounts considered were within the lender’s policy guidelines, none of the borrowers aged pension entitlements were affected by their decisions, and all four considerations were considered positive in the assessment.
Paul Dwyer Seniors Equity Release specialist