Ms William (63) owns a 2 bedroom apartment in Canberra worth over $600,000. She is a trained and certified accountant. She was retrenched in a corporate restructure, and due to her age she struggled to get other work. Due to her age she was not eligible to receive an old age pension. She has very little super as she spent most of her adult life working in the home raising her children.
Ms Williams was left to survive on the Job Seeker payments, but this was not enough for her to even pay her rates and body corporate fees and she was not living comfortably. She took out a reverse mortgage on her apartment with a regular payment of $1,000.00 a month or $60,000 over 5 years.
The relatively small amount drawn per month means the interest charged is kept to a minimum. According to the ASIC reverse Mortgage calculator after 5 years the likely amount owed at current interest rates (5.09%) will only be $69,445. But the property will have increased in value from $600,000 to $695,000 (3.0%p.a property growth)
Once she is eligible for the aged pension we will work with her to reassess her situation to see if she needs to continue to access her equity monthly, or whether she can stop her regular payments and only access funds on ad hoc basis as necessary. This will incur a saving for Ms William as she only pays interest on the loan for money she has drawn down.
This loan facility has provided the Ms Williams with a new leash on life and she can, now look for another job or even enjoy an earlier than expected retirement without the financial hardships she was struggling with.
(Names and Suburbs have been changed to protect the identity of our clients.)