According to Ambreen Sumar, a residential and small business lending expert with financial services firm Omniwealth, most Australians over the age of 65 own their own home.
Some Australian home owners, Ms Sumar said, may be able to benefit from a reverse mortgage to meet some of their income and cash flow needs.
Reverse mortgages work by allowing homeowners to “borrow against the equity in [their] home”, without having to sell the property or lose out on property price growth.
“The loan can be used as a lump sum, regular income plan or a line of credit, so you have flexible options depending on your circumstances,” Ms Sumar added.
Ms Sumar said there were six ways that retirees for whom a reverse mortgage suits can use the money they free up in the process.
Income and pension top-up
For pensioners, a reverse mortgage can be used to improve cash flow, by providing a new regular source of monthly income to help cover medical costs and personal needs, Ms Sumar said.
“Having the additional monthly income that a reverse mortgage can provide means you can enjoy coffee with friends at your local café or indulge in a dinner outing now and then without worrying if you can make it to your next pension payment,” she said.
Home repairs and renovations
Ms Sumar noted that some retirees will need to make repairs or modifications to their homes as their medical needs change, while some older homes may additionally need repairs in order to maintain the property’s value, and that funds generated through a reverse mortgage can help with these changes.
A challenge facing many Australian seniors is meeting monthly repayments on credit cards and high-interest loans, Ms Sumar said.
“A reverse mortgage can be a cost-effective solution to the problem by refinancing your mortgage,” she added.
Refinancing existing home loans
Retirees that are still paying their mortgage after retirement will undoubtedly have a reduced income stream, making it difficult to maintain the lifestyle they were accustomed to before leaving the workforce, Ms Sumar said.
Reverse mortgages can be used by some retirees as a way to refinance their mortgage and help alleviate some of this pressure, she added.
Paying for aged care
Covering a refundable accommodation deposit can be difficult and expensive for many Australians, Ms Sumar said, and for many the sale of their family home may be the only way to do so.
Ms Sumar said a reverse mortgage can assist in meeting this fee, while still allowing retirees to maintain ownership of their home.
Travel and holiday expenses
Travelling can be expensive, and Ms Sumar said many Australian seniors miss out on trips they want to take due to the expense.
“Organising a reverse mortgage may help you climb aboard that cruise you’ve always dreamed of, fund a visit to your family interstate or overseas, or finally taking that tour through Europe with friends,” she said.