Baby booming into retirement through property
THE latest round of figures showing rising home values in almost all our state capitals highlights how many Australian retirees could have a valuable resource at their fingertips.
Older Australians, who may not have enjoyed the benefits of employer-paid super for their entire working life, can face the prospect of a lean retirement.
However, one area where over-50s often have an advantage over their younger counterparts is home ownership.
ABS data shows that among the under-35s, there's not much in it between the proportion of renters and those who own their home. Among the over-65s, almost 85% of people are homeowners. This is important because for senior Australians home equity can be a source of retirement income.
It's all thanks to the availability of reverse mortgages - a financial product that allows homeowners, usually aged 60-plus, to draw on home equity with loan funds secured by their home.
No repayments are necessary with a reverse mortgage, at least while you live in the place. Interest charges and fees are added to the loan balance with the total to be repaid when the property is sold or the last borrower has passed away.
It's an option for asset-rich, cash-poor seniors to boost retirement cash. But reverse mortgages do have downsides.
- Paul Clitheroe is the founder of ipac.