More than 40,000 Australians have turned their homes into retirement funds, with new figures showing the Gold Coast dominating Queensland’s reverse mortgage rankings.
The Gold Coast claimed three of the state’s top five suburbs with homeowners choosing to release home equity rather than sell to fund retirement.
New figures from leading reverse mortgage broker Seniors First reveals Broadbeach (4218), Helensvale (4212) and Southport (4215) hold the highest rates of reverse mortgages in Queensland, alongside Bargara (4655) and the Bundaberg region (4670).
Seniors First CEO Darren Moffatt said it was no surprise the Gold Coast has such a high rate of reverse mortgages.
“Between the climate, lifestyle and healthcare, it is genuinely one of the best places in Australia to retire and homeowners are realising they can stay in their home and have it help create an income and fund their way of life.”
Deloitte figures show more than 40,000 Australians now hold a reverse mortgage with more than 8,000 signed in the past year.
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Mr Moffatt said the gap between superannuation and the cost of retirement was widening.
“We are seeing people who have worked hard, paid off their home and built significant equity who find superannuation alone isn’t keeping up with the cost of retirement,” he said.
“For many Australians, their home is their biggest financial asset.
“Rather than selling and downsizing or leaving the communities they know, they are turning to reverse mortgages as a financial solution.”
Mr Moffatt said it was increasingly becoming an option as a result of softening house prices since the Federal Government tax changes with people more likely to delay selling.
More than 5.5 million Australian homeowners are over 55, and almost 2.5 million are set to retire within a decade.
Mr Moffatt said the no negative equity guarantee was the key safeguard ensuring borrowers can never owe more than the value of their home.
Intuitive Finance managing director Andrew Mirams said reverse mortgages could provide retirees with access to much-needed cash without having to sell their home, but they should never be viewed as “free money”.
“The biggest risk is compounding interest because regular repayments are generally not required, the interest is added to the loan balance and the debt can grow significantly over time,” Mr Mirams said.
“This can gradually erode the homeowner’s equity, leaving less money or equity available if they later need to downsize, move into aged care or meet unexpected medical and living expenses or just helping family members financially.
“It can also substantially reduce the inheritance ultimately passed on to family members.”
Julian Finch from Finch Financial said older homeowners may use reverse mortgage funds for repairs to their property, on a holiday, to secure a spot in a nursing home prior to the sale of their home or for medical treatments
“My view for my own mother is I want her to enjoy her life to the maximum – if she chose to borrow money on her home and take a first class trip around the world and eat in fancy restaurants and leave me and my sister nothing – then I would be okay with that.
“Everyone however would have heard about family disputes arising from wills and estates after someone’s passing.
“You can pay out these loans by selling your home or of course through finalising of your estate.
“Typically the estate part is where most issues occur – some might say ‘who cares I’ll be dead so it wont bother me’ but the family members left behind who weren’t part of the decision might feel ripped off.
“This is a problem for them to resolve of course.”
Originally published as Aussie homeowners turning to reverse mortgages to avoid selling up
