New product helps retirees access ‘fast cash’ instead of accessing super

Is drawing on home equity in times such as these a more sensible option?

Older Australians can now access ‘fast cash’ instead of accessing super

Australians over 60 facing funding shortfalls or wishing to help family members get through a difficult time can now apply for a new product to draw on their home equity.

Independent retirement funding provider Household Capital has overhauled its home equity product and added an accelerated application process to meet the needs of older Australians during the COVID-19 pandemic

This includes a ‘rapid access contingency’ $20,000 home equity offer.

“We know retirees are doing it tough and facing reduced incomes due to shrinking super balances and investments,” said Household Capital chief executive Josh Funder.

“The government stimulus package focused on working Australians and while the banks have provided interest repayment holidays, none of that has helped retired Australians get through the crisis.

“Stepping up to offer $20,000 to cover living expenses or help out kids or grandkids who have lost jobs in the pandemic is the right thing to do, at the right time.”

The new ‘$20k Top Up’ is an alternative to having to utilise the government’s early access to super scheme – and the losses that will inevitably incur.

Mr Funder said the rapid funding might also provide a financial boost for retirees facing a loss of income due to falling dividends, term deposit rates and rental income.

In addition to the ‘Top Up’ lump sum payment, the company has also announced accelerated access ‘Home Income’ – a regular drawdown on home equity that allows retirees to maintain their retirement lifestyles.

“Australian retirees need access to both capital and income. These solutions will help them get it right now and in the long term,” Mr Funder told YourLifeChoices.

“The Top Up might help retirees fix up their home for lockdown, offer support to a family member in need or help funding a health emergency. Home Income can provide them with security and support in the case of losses in retirement income they’d usually be getting from rental payments, dividends or share-market income.”

As a general rule, said Mr Funder, when accessing the Home Income solution, customers could remove three ‘zeroes’ from the total value of their home, take that as a monthly payment, and still have significant equity in their home to facilitate future retirement funding.

“If your home is worth $1 million, most customers could draw down $1000 a month and have plenty left to fund the rest of your retirement needs” he said.

According to Household Capital, regular interest repayments are not required, and while the loan must be repaid when the customer leaves their home, applicants can repay the loan at any time without financial penalty.

“The big banks have abandoned retirees,” said Mr Funder.

“All Household Capital products ensure customers have a retirement-specific financial solution for the long term and they also offer guaranteed occupancy.”

Payments will be fast tracked and, typically, made available within two weeks, comparing favourably with the potential nine-month wait times on the federal government’s Pension Loans Scheme.

“We don’t want people to have to wait – they need access to their savings to meet their current needs as well as fund their long-term retirement,” said Mr Funder.

“Smaller loans like these are not profitable to originate in a business sense, but we view it as a service to make sure Australian retirees have access to their savings when they really need them.”

Most Australian retirees today have much more saved in their homes than in their super or investments. According to Household Capital, drawing on home equity in times such as these can be a sensible option.

“It’s becoming clear to retired Australians that their homes are both the best place to live as well as the best way to fund their retirement,” said Mr Funder.

Would you consider accessing the equity in your home instead of crystallising losses in your super? If not, what is preventing you from doing so?

Household Capital is a YourLifeChoices preferred partner.

If you enjoy our content, don’t keep it to yourself. Share our free eNews with your friends and encourage them to sign up.

RELATED ARTICLES

    Financial disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.





    COMMENTS

    To make a comment, please register or login
    Maggie
    18th Jun 2020
    11:00am
    "Fees and charges are payable " . Indeed they are on drawing on a loan on your property to fund your retirement.
    Sounds good until you dig deeper. You can only get this loan for a percentage of the house's value and whether you pay the interest on the loan while you live or after your death, there is interest to pay, and it's hefty enough for you to want to make this a last resort.
    john
    18th Jun 2020
    11:14am
    Anything that loses value for your property when the time comes to sell or leave in a will, is always got a huge catch, you devalue your assets , and you don't really know by how much? Like reverse mortgage if you borrow 50,000 on your "owned" property equity, like a relo of mine, when you finally realise the value cash-wise, or someone in your family lives in the place or wants to sell it, that person will owe whatever is there or what ever is left of all other costs of the 50 grand and its balance.
    There is never easy/safe loaning that take your "owned valuables" and de value them .
    That is the same as being a 40 yo and grabbing access to your super.
    its taking yours or someone in your will's future down a peg.

    LAST RESORT absolutely! You'd have to be in dire straights! Loans from any institution bank specialists, are never ever free, and always full of catches, and the banks even after the ROYAL COMMISSION ARE BEGINNING ALL OVER AGAIN.
    Muttonbird
    18th Jun 2020
    11:42am
    So what is the interest rate? Other costs?
    Oh, sorry - please avoid information overload on us desperate and demented oldies!
    Maggie
    18th Jun 2020
    11:51am
    You are right. It seems to me that there is a fair old bit of advertising going on on these pages.
    It would be interesting to know what Household Capital paid to have this article published here.
    Florgan
    18th Jun 2020
    11:49am
    surely having the opportunity to stop living like a pauper , freezing through winters etc is a perfect example of having access to the equity in your home, live a little more comfortably in your last years. Your beneficeraries are more likely weathier than you are anyway and as the saying goes- you cant take it with you !
    Mariner
    19th Jun 2020
    8:47am
    Get the money from your rellies and other future beneficiaries first before you enter such a scheme. If in that situation I would sell the big joint, live in a more compact place, have $300'000 in the bank and get the full pension. We do not live here to benefit the heirs and successors in my book. Aussies just have to leave all this saving and scraping, spend their savings before they depart, the kids can make their own money like we had to. I have lived in many countries, no one is as obsessed with leaving the house to the kids like the people here. Well, the younger generation won't be like that - they are not saving and scraping now.
    Rae
    19th Jun 2020
    9:21am
    A friend just did that. Downsized, moved a bit back from the beach and pocketed $300 000 after improvements to get an easy and reliable aged pension and those concessions.

    It's having to pay full price as prices rise that is killing SMSFs.
    Mariner
    19th Jun 2020
    10:39am
    SMSFs should be entitled to the pensioner concession card, after all they are saving the taxpayer a lot of dosh. I am on part pension and should the asset test be tightened I just spend more to keep my concession cards.
    fish head
    18th Jun 2020
    12:28pm
    Florgan , think. The people in the circumstances you mention usually do not own a home to "call down " against. The problem with a lot of these schemes is the inability of the user to restore their funds to their original levels when the emergency is past. while a wage earner you stand a chance. On a pension forget it unless you can live on wind pudding and air sauce and then you will be told you have too much in your bank account.
    Karl Marx
    18th Jun 2020
    1:29pm
    Looking at their web site they say they offer the lowest comparable reverse mortgage interest rate in Australia on their Household Loan reverse mortgages of 5.15% compared to a comparison rate of 5.21%
    WOW 0.06% cheaper.
    Wouldn't touch it with a barge pole.
    Horace Cope
    18th Jun 2020
    1:48pm
    Just another word of caution, the interest is compounded. Every time interest is charged, it becomes capital and therefore subject to interest. So, using a simple loan of $10,000 over 10 years @ 5.16%, interest charged monthly, the balance at the end of 10 years would be $16734.61 or an effective interest rate of 16.73% without adding any fees.
    Sceptic
    18th Jun 2020
    2:14pm
    interesting "new" maths Horace.
    Greg
    18th Jun 2020
    3:30pm
    No it's not an effective interest rate of 16.73% at all. Rates are "percent per year" so 16.73% would be $1,673 for year one, multiply that by 10 years and you have $16,730 INTEREST.

    The effective rate per year is 6.735% without adding the interest to the capital.
    Horace Cope
    18th Jun 2020
    4:25pm
    My apologies, we had to leave for an appointment and the post was rushed. I agree with Greg's final figure of 6.735% which is what the compound effect will give because it becomes interest on interest as there is no scope to pay the interest when charged.
    Nomad1946
    18th Jun 2020
    3:33pm
    Another "get rich scheme" for the "provider" preying om older Australians.
    I would be VERY aware/careful with schemes such as these ...... Should be ILLEGAL!!!!!
    patti
    18th Jun 2020
    3:41pm
    Yes, the interest is compounded, yes you end up paying quite a bit extra. But in an emergency it's a good way to raise some $$ to help out, and the value of one's home is unlikely to go down. The lending institutions are not banks. I had no super so this was a perfect answer for me. And now I am selling my house and downsizing I can repay what is owing and be free and clear. It won't work for everyone, but it has for me.
    Arvo
    18th Jun 2020
    5:40pm
    It's OK for those who own a home over $1 million, what about the pensioners who own a home unit worth less than $120,000 in country and regional areas? What about them? Will they qualify for $20,000 or just $2,000 that is if they qualify at all.
    Rae
    19th Jun 2020
    9:23am
    Centrelink offers loans on better terms if something big needs doing. Otherwise saving is a choice in country areas as living can be much cheaper too.
    Mariner
    19th Jun 2020
    10:48am
    Rae - living in the country may be cheaper but really only as far as housing is concerned. No $2.50 all day transport in a lot of places (car needed). Services to be accessed much further away and a lot of freight costs added. Fuel almost always 2 Bob dearer per liter and so on. Supermarket (one if you are very lucky). I live in a larger country town but still my rate bill for a small unit is $2340 a year after the pensioner rebate. Body corp at $2800 a year. So country living is not that much cheaper.
    Youngagain
    18th Jun 2020
    7:35pm
    Retirees are fair game for vultures, aren't they. Any loan to a retiree is always two to three times the going loan interest rate - including loans offered by the government. Disgraceful!
    MJM
    19th Jun 2020
    3:53am
    I have been drawing down on my home for years. For cars holidays to help my kids. Better than the interest rate anywhere else right now. All you oldies who are afraid to enjoy life!!! Who cares if there’s money owing when you die... you’re dead!!!! Nothing is scarier than that so take out 20k go to Europe for that last fling buy a big screen tv .... whatever!!! Stop being so bloody old!!!!!
    Maggie
    19th Jun 2020
    6:50am
    Bully for you! How about stop being so bloody judgemental about the way other people choose to spend their hard-earned money.
    Believe me the bank will be certain that there is no money owing to them when you die.
    MJM
    19th Jun 2020
    8:03am
    Actually sweetheart I own everything. So how about you stop being judgemental and get a life ... oh wait you have to hold onto everything cos you aren’t as good as I am with money. Jealous much???
    Maggie
    19th Jun 2020
    8:37am
    Well of course you own it. You can't borrow unless you have security.
    Luckily I don't have to borrow a cent to do exactly what, where, when and how I wish.
    And I have the satisfaction of having a few bucks to leave to the people I care about.
    Farside
    20th Jun 2020
    12:18pm
    Spending down your savings is a challenge for many retirees; MJM and Maggie have each nailed it in their own ways.
    Tarabelle
    19th Jun 2020
    10:47am
    You do not pay for this in monthly payments. The repayment of this "loan" attracts higher interest rates, which are building a huge debt, to be repaid on your death from the sale of your home. The inheritance you wished for your children will take a massive hit. I would look at a personal loan before I looked at this reverse mortgage option. There are expensive loan set up charges, and the amount you can borrow is based on the value of your home, and is usually for bigger amounts of money borrowing. I have looked into this, as I am one of the "asset rich, cash poor " this reverse mortgage is aimed at. It didn't look quite so good when I did my "due diligence", so I'll just continue to live modestly on what money I do have. Living like this does not mean that my life is, or has to be miserable or unfulfilled...the only thing that causes me any anxiety is knowing that my power bill is due any day. I have taken steps to relieve this anxiety, by reading the meter everyday, and calculating the amount payable. It makes me more aware of turning unnecessary things off, and it tells me if I can turn the heater on ....all good.
    LeonYLC
    19th Jun 2020
    11:48am
    Hi YLC members,
    This was not a paid article and not part of HC campaign. While this retirement funding solution may not appeal to everyone, we thought it valuable information for you all to have. Nice to know your options.
    We have also included a disclaimer, and if you'd like to see more information, including interest rates, please visit or call Household Capital, who will be only too happy to help you!
    Cheers,
    Leon
    Farside
    19th Jun 2020
    6:41pm
    Leon, perhaps as editor you could ensure readers are given a balanced perspective by including a counterargument to Household Capital's proposal so they can reach a more informed conclusion. Also I note Household Capital is a YLC Preferred Partner so is there not a conflict of interest to be declared?
    Suze
    19th Jun 2020
    12:48pm
    I can see a benefit to such a scheme if the government was to include the value of the home in means testing for an aged pension.
    Oxleigh
    21st Jun 2020
    6:19pm
    Don't damn well do it.
    It's another way for someone to get their hands on retirees money, when you are dead and gone or too old to live in the home any more there will be penalties.
    Ask about the managing of your assets after death.
    Just another job for the executor to worry about unless it is handled by the PUBLIC TRUSTEE. DON'T TRUST THEM EITHER because then the family won't see a thing without a fight and you can kiss it goodby.
    Another reason to fight to keep the governments hands on industry super funds.
    THEY WANT TO CONTROL YOUR SUPER.
    The people wanting to offer this reverse mortgage want their cut before the govt gets stuck in and controls the industry super funds.
    TRUST no one with your retirement fund, watch it very closely.


    You May Like