As we age, working to maintain our body’s flexibility becomes an even more important part of our exercise program if we are to continue enjoying an active, healthy and more comfortable life into old age.
But it’s not just physically that flexibility can contribute to our well-being and our ability to achieve the lifestyle we would like to have in retirement.
Financial flexibility is also important for health and happiness. Being able to relax knowing that options are available to access funds when needed is essential to achieving a stress-free or worry-free retirement.
Reverse mortgages are a financial option that is gaining increasing interest due to the flexibility they offer, with features designed specifically to meet the needs of people in transition to retirement or already in retirement.
A reverse mortgage helps homeowners aged 60 and over relax the financial strength they have in their home, using equity to access funds with a range of choices to tailor the loan to their circumstances, from way they would like to withdraw the funds the moment they want to pay it back.
Reverse mortgages can be used to get a lump sum, get regular cash advances for up to ten years, or a cash reserve (like a line of credit) to help finance anything from home repairs and improvements. debt consolidation or the purchase of a new car.
No regular reimbursement is required. However, you can choose to make refunds at any time without penalty. The total amount of the loan, including interest, must not be repaid until you leave your home for good, most often when the house is sold.
“Everyone’s financial needs in retirement are different and that also changes over time as you get older,” said Sharon Yardley, operations manager at Heartland, Australia’s leading provider of reverse mortgages.
“For example, at first you might need additional funds to pay off your mortgage, then access ongoing funds to supplement your income or make changes to your home to allow you to stay there as you age, then later for the care of the elderly.
“Our reverse mortgage loan is designed to meet the needs of our clients with flexible withdrawal options, flexible repayment options and for all purposes that could lead to a more comfortable retirement.”
Case Study: David and Margaret
So what does this look like in practice? David * and Margaret, husband and wife from Melbourne, are Heartland clients who used a reverse mortgage to find a solution to their financial problems.
David, 63, and Margaret, 72, own their home valued at $ 1,000,000. They decided to apply for a reverse mortgage to pay off $ 33,000 of unpaid debt and to fund $ 25,000 of home improvements, in addition to providing an additional $ 2,000 to cover their attorney’s bill and other small fees. , for a total of $ 60,000.
They also wanted to use a reverse mortgage to supplement their income and requested a regular advance of $ 1,500 per month for five years – an additional total of $ 90,000.
Regarding their future needs, the couple also requested a $ 30,000 cash reserve facility so that they could apply for funds when needed, in case an unforeseen expense arose.
In total, the amount they wanted to borrow was $ 180,000.
When reviewing the application, Heartland used the age of the couple’s youngest, David, to calculate how much they could borrow.
The calculation is based on the loan-to-value ratio (LVR), a term which designates the ratio between the amount of a loan and the value of the property at the time of subscription, multiplied by the value of the home.
In this case, the LVR was 18%, which meant that David and Margaret could borrow $ 180,000, provided their debts were paid off when the house was sold.
If you’re interested in learning more about reverse mortgages, contact the Heartland team at 1300 889 338 or download your free guide to reverse mortgages.
Every situation is different – this information has been prepared without considering your needs, goals or financial situation. If you are considering a reverse mortgage, we encourage you to understand how it can affect your personal situation – talk to friends and family, talk to professionals, and use the resources and tools available at Heartland.
* David and Margaret are real Heartland customers, but their names have been changed for privacy reasons.