Source your own equity to enhance your lifestyle
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Lifestyle
Most retired people in
This is often done by selling the family home and purchasing something smaller and less expensive. In doing so, they may move to a less desirable suburb, which is not as well serviced and is further from familiar friends and services. Those who purchase another freehold title will incur significant costs for removal expenses, agents fees, and stamp duty on the new purchase. This could represent tens of thousands of dollars in dead money.
Many people, particularly those in their early seventies, will choose to move into a
The Reverse Mortgage or Equity Release Loan now provides seniors with the alternative to supplement their income from the equity in their own home, without having to move or make regular loan repayments.
Those who do choose to move into a
How much do you need to live in Retirement?
Of course this will vary for each individual or couple. However, the Westpac ASFA Retirement Standard provides us with some insight. A study published in March 2009 calculated that a couple who own their own home need $27,547 for a "modest" lifestyle, and $50,771 for a "comfortable" lifestyle.
It is worth noting that the annual maximum pension for a homeowner couple is $24,903 per annum at that time. An earlier study in 2007 said in part:
"The modest budget allows for the basics but very little else. For example, both eating out and entertaining at home is very restricted, and no overseas travel is possible. The extra expenditure associated with a shift from a modest lifestyle to a comfortable lifestyle in retirement adds a lot to enjoyment, comfort, style, holiday travel, health insurance cover, and the ability to more fully participate in modern Australian society. At the modest budget level many retirees would not be able to participate in a range of sport and social activities that involved out of pocket expenses of various sorts."
The study provides a detailed budget breakdown, covering over 50 line items, for each of the modest and comfortable lifestyles. This may be used as a checklist against your current expenditures.
Obtaining a regular cash flow from a Reverse Mortgage can help to bridge the gap between current low level incomes and that needed for a modest to comfortable lifestyle.
This study can be viewed at: www.superannuation.asn.au/RS/default.aspx
How much longer will you live?
If you are taking out a Reverse Mortgage, and it continues to accrue a debt until you sell the house or you die, it would be good to know how much longer you have.
Of course, none of us can answer that. Your likely additional years will depend on how you have lived your life until now, and your genetic make up. If you have had many family members that lived into their 90s, then there is a chance that you will also, if you currently enjoy good health.
However, this needs some subjective judgement, so you may prefer to consult the following table which was extracted from information put out by The Australian Bureau of Statistics. It can be seen from the table that a 67 yr old female should be allowing for a Reverse Mortgage to be in place for at least 20 years.
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