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Guest Post by Andrew Ford, CEO of Heartland Seniors Finance
People often ask me why am I so passionate about Reverse Mortgages. I guess many Australian seniors are either wary because of the misinformation and misconceptions that still linger in the market, or don’t see how someone can be so passionate about a ‘financial product’.
The reason that I love Reverse Mortgages so much is that I have seen firsthand what they can do for people. I have spoken to, and met with, thousands of seniors whose lives have literally been changed by a Reverse Mortgage. I think that’s pretty neat.
Am I overstating the impact? Life-changing?
I don’t think so – you just have to look at what you can do with reverse mortgages:
1. Reverse mortgages can improve your standard of living
When you stop working, your regular income will be significantly reduced. Relying on your pension or superannuation may not be enough to sustain a comfortable lifestyle. Remember, superannuation was only mandated by the Government in 1993. Therefore, if you started working in the 60s or 70s, there is a lower chance that you have gained enough fund for your retirement.
In a recent report from The Association of Superannuation Funds of Australia they noted that the Aged Pension only covers a third of what is considered to be a comfortable lifestyle in retirement.
Many Australians today don’t have enough money for their everyday expenses yet they live in properties that are worth hundreds of thousands. With a reverse mortgage, you can convert a portion of this equity, which you can use for aged care, home renovation, payment of debts, and many more.
2. Proceeds of reverse mortgages can be used for debt payment
No one wants to spend retirement still paying high-interest debt. But many seniors living on pensions are using credit cards if their funds are not enough. With a reverse mortgage loan, you can save money on repayments while getting peace of mind. Usually, seniors are no longer eligible for a mortgage or credit line, but with reverse mortgage you can access the cash you need to pay all your debt. Also, repayments for reverse mortgage are not required, so you don’t need to worry about monthly dues.
3. Reverse mortgage can fund your aged care needs
While government support is available to allow seniors to stay at home to receive aged care, the financial subsidy may not be enough to cover all expenses and depends on an asset test. Wealthier seniors may not be eligible for any home care service benefits. If you have been evaluated as capable of shouldering a portion of the home care services, your home care provider may ask you to pay first either a basic daily fee or an income-tested care fee before they provide you with assistance.
In reality, many seniors, especially those with reduced income may still struggle despite of receiving government subsidy. It’s important to remember the cost of retirement living could increase in the next few years. The rising prices of basic goods and increased expenditures for medical treatments can make it hard to make ends meet.
Taking out a reverse mortgage to assist with aged care services can give flexibility and breathing space for seniors and their families during a stressful period of change. The loan proceeds can also be used to supplement retirement income, regardless of the pension level, to cover home care costs not included in the government subsidy.
An aged care loan can also be used to fund residential aged care.
4. Realise your dream holiday
After long years of working hard and building your personal wealth, you now have all the time in the world to do anything you want. Why not realize your dream holiday this year? Nothing could hold you back, except if you don’t have the money to finance your travel and holidays, of course.
Rather than using your pension or spending your personal savings to fund your holidays, you can unlock a percentage of your home equity to access more cash through a reverse mortgage loan.
5. Considerable consumer protection
Reverse mortgages are probably the most heavily regulated consumer finance product in Australia. As long as you adhere to the terms of the loan you are guaranteed to be able to stay in your home as long as you choose (lifetime occupancy), you can never owe more than the value of your sales proceeds of your property (no negative equity guarantee) and you do not have to make a repayment until the end of the loan, but are free to do so without penalty at any time. Legal advice is mandatory and at Heartland our team and our accredited broker network work hard to ensure customers make an informed decision.
That is why I am a ‘true believer’ in Reverse Mortgages for seniors. I don’t think there is another financial product out there that has as much power to genuinely change lives people in quite the way a Reverse Mortgage can.
If you would like to see if a Reverse Mortgage is right for you or just to discuss Reverse Mortgages in general please feel free to give me a call – 1300 889 338.
You can also watch the animated explainer video below to get started with Heartland reverse mortgages: (Video to be embedded on blogpost)
Andrew Ford, CEO, Heartland Seniors Finance
Andrew Ford is the CEO of Heartland Seniors Finance and has been with the Heartland group for over 15 years. He is passionate about reverse mortgages and the difference it can make to the lives of seniors.