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How will you fund a 30 year retirement? 
According to the World Health Organisation, Australia is second in the world only to Japan in having the healthiest generation of the retired and elderly, and our extended life expectancy is set to continue to improve. That’s good news but it is also going to have significant social and economic impacts.
This longevity trend is forcing us to change our way of traditional thinking in retirement. Those who are aware of their prospects of living to an old age, even a very old age, are asking: Do I have enough savings for my retirement?
A lot of personal wealth is locked up in property!
For many retirees, much of their accumulated personal wealth is locked up as equity within the family home. That maybe great as an inheritance for the children but if you need money now for health care, a better or more reliable car, a holiday or any other purpose then its not much good being asset rich but cash poor.
Alternatives to selling the family home just to buy a better lifestyle
A loan against the equity in your own home, holiday home or investment property is commonly called a reverse mortgage or equity release. The unique benefit of these types of loans is that they require no repayments during the life of the loan. Any repayments are not due until the borrower sells the property or both partners pass away.
 With a Reverse Mortgage the borrower starts off with little or no debt, but can make a lump sum withdrawal or arrange for regular “pension style” payments to be made from the facility. This acts as a type of pension to supplement your existing income, and thereby enhances your lifestyle without affecting old age pensions or other entitlements. After all you are spending your own home equity and this is not considered income. The lenders put a borrowing cap on your loan so that you can’t over borrow and lose your home. The loan is repaid in full when either you sell your house or when the estate is finalised. This is an attractive idea for many people who are in the latter stages of their life with solid assets but little cash for necessary medical expenses, perhaps a life saving operation, and quality of life issues etc. Regular pension style payments to your bank account can still be set up, and you still have the option to draw larger amounts if required
 It just doesn’t make sense to live with health problems that can be easily solved, pain that can be cured, large bills that can be met, or just dreams that can be lived if only you could access some of the equity locked away in your house. It is your house and you have earned the right to live with dignity and enjoy the fruits of a lifetime of labour.
In years gone by banks would not lend to pensioners because they didn’t have the income to service the loan, and many people had to sell their house or downgrade to access their equity. Often retirees were forced to move to a different area away from their family and friends, doctors and carers, local shops and everything that made up their community. However, this is an entirely new concept that allows you to stay in your house and access your home equity.
SEQUAL - Senior Australians Equity Release Association of Lenders
There is growing number of specialized lenders who cater to the retiree market and probably in the near future most of the major banks will be involved as well. It is too big a market for them to ignore. SEQUAL - Senior Australians Equity Release Association of Lenders is a not for profit association supported by Australia’s leading providers of Equity Release products. All members of SEQUAL have voluntarily agreed to adhere to the SEQUAL Code of Conduct. You can get further details from the SEQUAL Site.
To qualify for this type of loan
- You must be 60 years of age and over and own a property to qualify for a reverse mortgage or what is sometimes know as “seniors finance loan” – there are no other requirements.
- The Title of the property stays in your name.
- You can use the proceeds of the reverse mortgage seniors finance loan anyway you wish - for your daily living expenses, health care, home repairs, a holiday, to buy a new car, to help your children or even payout existing debts or credit card debts.
- Your other benefit is that these loans are “non-recourse” which means that no matter what the borrower never owes more than the property sales value.
- You can receive the proceeds from your reverse mortgage seniors finance in several ways – as a lump sum, monthly amounts paid into your bank account or yearly payments direct to you or a combination of your options. It is your choice.
- The amount that you can receive will depend on the value of your property and your age. The older you are the more that you can receive.
- The loan can always be repaid from other assets if required or by your estate if the family wishes to keep the home or property.
Typical lending guideline
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Age
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60
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65
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70
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75
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80
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85
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90
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% of property value available as cash funds
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15
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20
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25
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30
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35
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40
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45
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