The evolving landscape of housing and financial challenges for older Australians is a growing concern.
A recent study by the Australian Housing and Urban Research Institute (AHURI) highlights the obstacles many seniors face when seeking appropriate housing and suggests a potential avenue for relief: Reverse Mortgages.
AHURI’s report brings to the fore some worrying statistics. By 2031, an estimated 440,000 older households may be unable to afford or find suitable housing. This stems from a mix of declining home ownership rates, increased mortgage debts for retirees, and limited access to social housing. With seniors dipping into their superannuation funds to manage mortgage debts, their overall quality of life is at risk.
Furthermore, the study indicates that while many older individuals with low incomes cannot manage a mortgage, a considerable number are spending a significant chunk of their earnings on rent. If these individuals had access to loans, two promising options for homeownership would emerge, both offering stability and wellbeing: shared equity mortgages and land lease mortgages.
The research plotted the growth (and decline) of older, low-income households throughout Australia, forecasting changes up to 2031 at a suburb-level granularity. The most prominent expected growth is in the peri-urban and outer-suburban zones, along with notable increases in some regional and countryside areas.
Dr. Debbie Faulkner, the lead researcher from the University of South Australia, points out that many older Australians are leaning towards shared equity home ownership, cooperative housing, and transportable housing models. This shift in preference is motivated by the cultural emphasis on home ownership in Australia.
Despite these models showing promise, there’s a stark reluctance from banks to provide mortgages for such arrangements.
Australian seniors can take advantage of Reverse Mortgages
Reverse Mortgage loans are an existing form of home equity release that can play a role in solving these challenges for Australian seniors. Unlike traditional mortgages, a Reverse Mortgage allows homeowners to borrow money using the equity in their home as security.
The loan can be taken as a lump sum, a regular income stream, a line of credit, or a combination of these options. This provides the homeowner with the flexibility to manage their finances without the immediate burden of monthly repayments. The loan is repaid when the homeowner sells their home, moves out of the home, or passes away.
For older Australians grappling with financial constraints, Reverse Mortgages can offer several advantages.
Over 60’s Cash Flow and Financial Security
With increasing mortgage debts, a Reverse Mortgage can provide the necessary financial relief to seniors. The funds can be used to clear outstanding debts, ensuring a more comfortable retirement lifestyle.
Beyond just aiding in the immediate clearance of debts, a Reverse Mortgage offers seniors a semblance of financial independence. It gives them a buffer against unforeseen expenses and emergencies, ensuring they aren’t caught off-guard. A cash reserve facility can facilitate a more secure, relaxed retirement where financial pressures don’t overshadow the joys of this golden phase.
Preservation of Superannuation Funds in Pension Phase
Superannuation is a nest egg that many seniors rely on for their post-retirement years. In some cases, seniors may wish to preserve superannuation funds for longer to better ensure that they have more resources available for very long-term needs. This might include health care, assisted living, or other future costs that arise as they progress more deeply into retirement.
By using the equity in their homes, seniors may supplement pension-phase superannuation income (or what is now called ‘Retirement phase’). This may delay, or slow, the drawdown of superannuation funds, potentially creating more options for later life stages.
(NOTE: financial advice is recommended for this option).
Support for Alternative Housing
The report suggests shared equity mortgages and land lease mortgages as possible solutions for those who can only afford smaller loans. For existing homeowners, a Reverse Mortgage can be a potential solution in many cases.
A Reverse Mortgage opens up a broader spectrum of housing choices for seniors. No longer confined by the stringent requirements and hesitations of traditional lenders, they can explore newer, more suitable living arrangements. This flexibility ensures seniors find homes that match their lifestyle, health needs, and personal preferences, all while maintaining financial stability.
Reverse Mortgages: debt relief + housing stability
While AHURI’s findings shed light on the pressing challenges faced by older Australians, it’s clear that innovative solutions like Reverse Mortgages can play a pivotal role. By tapping into the equity of their homes, seniors can find relief from financial constraints and invest in housing models that cater to their needs. It’s a potential win-win, providing both financial security and housing stability for an ageing population.
As Australia grapples with the future of housing for its senior citizens, financial institutions, regulators, and policymakers must innovate more quickly. Arguably the pressures are felt most acutely by those older Australians in the private rental market. In some cases the lack of innovative product solutions are also affecting homeowners, by forcing unwanted property sales.
Are you eligible for a Reverse Mortgage?
If you’re considering a Reverse Mortgage, it’s important to do your research and speak with a specialist mortgage broker to determine if this is the right option for you.
To learn more about Reverse Mortgages, you can contact Seniors First on 1300 745 745 or click here to check if you are eligible.
The information provided in this blog is intended for general informational purposes only and should not be construed as personal or financial advice.