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While the dream of retirement is one of a golden time when we can leave our worries and stress behind us, the reality for many is not so rosy.
With house prices rising at a much faster rate than incomes since the mid-1990s, three times as many people are taking on mortgages and other debt in retirement.
Combined with the rising cost of living and Australians living longer – meaning savings and pensions need to stretch further – the result can be serious financial stress for people at some point. where they should be relaxed and enjoying life.
Since many retirees live solely on their pensions, their income is often not enough to meet mortgage payments or other debts, as well as to finance their retirement.
“The problem with deferring debt into retirement is that many people rely on the pension to live on, but the pension alone does not provide enough funds to cover a modest, even less comfortable lifestyle,” he said. said Sharon Yardley, operations manager at Heartland. .
“So if you haven’t paid off your home loan in full and are retiring with mortgage payments or other debt, those can be a significant part of your retirement income. The pension doesn’t have was not designed for retirees to still pay off a mortgage.”
Caught in this financial situation, some people may turn to credit cards or a personal loan to help them out, adding even more repayment stress to their lives.
There is the possibility of downsizing, selling the house to pay off the mortgage. But research has shown that more than 90% of people aged 55 and over want to stay in their current, beloved home and are reluctant to downsize.
One solution that continues to grow in popularity is the reverse mortgage. Designed to meet the specific needs of retirees, a reverse mortgage allows them to tap into the assets of their home to refinance their debts and access the funds needed to more easily manage their financial needs.
“It’s no surprise that the majority of Australians prefer to stay home, but we know it can be difficult to do and maintain a lifestyle on a limited income,” Ms Yardley said.
“But, by freeing up the equity in your home, a reverse mortgage could help fund the cost of retirement and allow people to age in place. In addition to consolidating debt, people typically use their reverse mortgages to pay home improvements to adapt their home for retirement so they can stay there longer, and later to fund home care if they need it.
One of the biggest appeals of a reverse mortgage is that it’s a product designed to be flexible and meet the specific needs of older people, Ms Yardley said.
With a reverse mortgage, regular repayments are not required, but voluntary repayments can be made at any time. If the regular repayments are not made, the total interest charged, as well as the sums withdrawn, will be payable at the end of the loan when you leave your home for good.
You can use funds from a reverse mortgage to consolidate outstanding debt into a single lump sum, eliminating the pressure of having to make regular loan payments. Heartland lending data shows that 46% of customers (as of June 2022) use a reverse mortgage for debt consolidation.
It can also be used as a regular stream of income for bills and expenses, or as a cash reserve (like a “line of credit”) for future needs or unforeseen emergencies, such as home renovations, travel , a new car, medical expenses and much more. After.
“Our goal is to enable older people to live a more comfortable retirement with independence and dignity,” Ms Yardley said.
“Innovative products like reverse mortgages are increasingly recognized as a valuable tool that retirees can include in their retirement planning so they can enjoy a better quality of life and greater peace of mind. ‘spirit.”
To learn more about reverse mortgages and how they could help you consolidate debt in retirement, contact Heartland Reverse Mortgages. Heartland has helped over 24,000 Australian seniors free up over $1.6 billion of home equity for a more comfortable retirement through their reverse mortgage. Request your free, no obligation reverse mortgage guide here, call 1300 889 338 or email us at [email protected]
Please note that the information in this article may change from time to time. Every situation is different – this information has been prepared without taking into account your needs, objectives or financial situation. If you’re considering a reverse mortgage, we encourage you to understand how it may affect your personal situation – talk to friends and family, talk to professionals, and use the resources and tools available to Heartland. Applications are subject to loan approval criteria. Terms, conditions, fees and charges apply. Credit provided by ASF Custodians Pty Ltd (ACN 106 822 780 / Australian Credit License No. 386781).
This is branded content for Heartland Reverse Mortrgages.