Why now isn't the time to sell – and how a reverse mortgage can be used to free up equity instead

Wondering how to use the equity in your home? Our customers have approached us with a diverse range of needs. These include:

• Setting up a regular fortnightly or monthly income facility
• Refinancing an existing mortgage
• Renovating or modifying their home to ensure it’s retirement ready
• Covering an unexpected medical expense
• Buying a new car
• Helping children or grandchildren buy their first home
• Funding in-home care expenses
• Funding the transition to residential aged care.

We find many of our customers simply like the security that comes from having a contingency fund for those unexpected expenses that can crop up from time to time.

Most equity release products are governed by the National Consumer Credit Protection Act 2009; these protections apply to our Household Loan and other reverse mortgage products.

1. You remain the owner of your home and the title remains in your name. This gives you 100% exposure to any growth (or loss) in the value of your property, into the future.
2. You can stay in your home as long as you want to – you have guaranteed occupancy. You cannot be removed from your home by the lender, nor be forced to sell your home at any time against your will, as long as you have met your obligations under the loan, as specified in the terms and conditions of the loan contract.You do have a responsibility to remain living in your home, to ensure the council rates are paid, to keep it insured and to keep your home well maintained.
3. You cannot end up owing us more than the house is worth. The “no negative equity guarantee” (NNEG) clause, introduced in 2012, means you are protected by law and cannot owe more than your home is worth, irrespective of the value of the property.

Most banks will not extend credit to retirees, whether through a home loan, a line of credit or credit cards. Lenders are required by law to ensure you can comfortably meet any repayments; if those repayments are likely to cause you financial hardship, they cannot provide you with finance.

Other options for finance when you're retired include a reverse mortgage or the government's Home Equity Access Scheme (HEAS). Both provide a mechanism to draw on your home equity and do not require regular repayments.

Household Capital was founded to help Australians over 60 overcome financial barriers. We enable you to unlock the wealth in your home to meet your current and future needs, and to live with security and comfort in retirement.

Several banks provide lines of credit or home equity loans that allow homeowners to access the wealth built up in their property. However, getting credit from the banks has become tougher for retirees since the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

Any form of credit has become less available to retirees who may not have the income to demonstrate they can meet the required repayments. The regular repayments needed to service a home equity loan or line of credit are likely to reduce your cash flow and therefore diminish your retirement income. As interest rates increase, so will these regular repayments. Each month, you may have to find the funds to satisfy the bank.

Many retired Australians tell us they feel insecure knowing their home is subject to repossession in the event of being unable to meet repayments. With a reverse mortgage, you don’t need to make regular repayments, although you can choose to do so. And whatever choice you make, you have guaranteed lifetime occupancy – you can stay in your home for as long as you choose.

Eligibility criteria for a reverse mortgage is as follows:

• The youngest borrower must be age 60+
• Australian homeowner
• The minimum property value of $600,000
• Property must be in an eligible postcode
• Primary residences, holiday homes and investment properties are available for security.