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Mr C (80) and Mrs C (74) have lived in their home on the Northern Beaches for over 50 years and inherited the house from Mr C’s Parents. They have a current Reverse Mortgage with a lender for $350,000 that they took out in early 2018. They have used this to supplement their income $3500 per month, buy new motor vehicles and do renovations on the house.

Due to difficult family circumstances the C’s have had to raise one of their granddaughters who is now at university. They took out the original Reverse Mortgage with a view to reviewing things in 4.5 to 5 years’ time. Having used most of their previous loan facility they are now refinancing their Reverse Mortgage so they can continue to support their granddaughter and stay living where they are for the foreseeable future. Since the original mortgage the value of the house has increased significantly from $2.5 million to $4 million. On top of this increase in the property value they can borrow 4% more of the total value then they could when the original loan was taken out due to their 4-year increase in age. They are now increasing their loan facility to $1 million dollars to ensure they can continue to support their granddaughter and maintain their lifestyle.

When they did the original Reverse Mortgage they were considering selling and moving to the Mid North Coast. This would have resulted in their granddaughter having to live in Sydney and start university without their support. If they had sold and bought another property up north for $1.5million they would have had considerable funds to invest which would have affected their pensions (even after stamp duty and agents’ costs etc). The Reverse Mortgage has allowed them to stay in a lovely home, support their granddaughter, and continue receiving the full pension. Furthermore, the increase in their properties value has been around 4 times greater than the Reverse Mortgage has cost. They fully expect the new Reverse Mortgage to last them the rest of their lives and they will still leave a large inheritance to their family.

Ms Thompsons and Mr Wade are in their 80s and they have an existing Reverse Mortgage of $740,000 to a lender that does not do loan increases. Over the 20 years of their retirement, they have used the Reverse Mortgage to renovate the home and travel extensively.  Even after a health scare for Mr Wade last year, both are still very fit and have no other beneficiaries except each other and some charities.

They want to replace their aging car as it has become expensive to maintain, do some more travel around Northern Australia, and replace their old kitchen appliances. 

Their property has increased in value from $1.6million in early 2018 to around $2.8million.

The combination of their increase in age and property value has provided a solution to refinance to another bank and get a facility limit of $1,092,000 which will give them another $350,000 to spend on the new car, travel, and paying for general living expenses. This will allow the couple to keep up with rising living costs and continue to live an active and enjoyable lifestyle.

(Names and details of this scenarios have been changed to protect the clients identity.)

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.)