More and more homeowners are tapping into their equity to help retire early and cover major expenses, with demand from younger borrowers driving a surge in reverse mortgages.
For Graham and Fran Burns, there’s no place like their own home. “Well, I love it here,” Fran said.
WATCH THE VIDEO ABOVE: Younger Australians turn to reverse mortgages for early retirement
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The couple are tapping into their biggest asset to help fund their retirement. “Instead of going through that whole process of downsizing,” Graham explained.
Now more Australians in their mid to late fifties are catching on and considering reverse mortgages.
The home equity loans are often funding renovations, debt repayment, new cars, regular income and travel.
Shane Churchward, who recently took out a reverse mortgage, is embracing his newfound freedom.
“Yeah, I’m 56 in a couple of months. I retired 17 days ago. I’m about to go to Thailand for a year,” he said.
Seniors First CEO Darren Moffatt says the trend is clear. “We’re definitely seeing a trend towards younger people and we’re also seeing a trend towards people in wealthy areas.”
Most borrowers are along the east coast, with 80 per cent concentrated in key areas including Broadbeach and Southport in Queensland, just across the border around Byron Bay, and in Sydney’s affluent upper north shore suburb of Northbridge, as well as Melbourne’s city and western suburbs.
“One common myth is that, oh, that’s the loan where the bank takes your house,” Moffatt said.
“That’s not the case. People can stay in the home as long as they want, until they die, and they can never owe more than what the home is worth.”
However, borrowers are warned reverse mortgages can have interest rates as high as 8 per cent.
The federal government is offering a similar, much cheaper scheme, giving seniors access to lump sums or fortnightly cash payments.
For Graham and Fran, the decision has given them peace of mind. “We’re beside ourselves with the opportunity to be able to stay here for at least five years,” Graham said.
