A change is playing out in retiree households across the nation. One that is barely discernible but will have major repercussions for a generation of retirees to come.
And that’s the change in home ownership status for Australians as they exit the workforce. Once it was a safe bet that a retiree would fully own their own home. Now, as 55-59-year-olds approach the first major retirement goalpost (age 60, or Preservation Age), there’s a 50% chance that they are still paying off a mortgage.
Still having a home loan is something that may or may not be manageable as you move into retirement. So what are your options?:
You might choose to sell, but that may mean leaving a familiar, preferred neighbourhood.
You might downsize, but costs of selling and repurchasing can sometimes negate any profits on the sale.
Or if your super is substantial enough, you might use that to pay down your loan, but that may mean no savings to top-up Age Pension payments when you are no longer working. Which brings us back to the topic of asset-rich, cash poor.
The steady increase in retirees with mortgages has seen a rise in both government and private equity access schemes. Statistics provided by the Department of Social Services to Retirement Essentials late last year show the government scheme (described below) has gone ahead by leaps and bounds since it was introduced, with participants (over the previous 12 months) increasing from 9750 in June 2023 to 13,479 in June 2024.
Today we consider the two most popular ways of accessing home equity, their features and benefits and how they compare. These two forms of home loan are:
The Australian Government Home Equity Access Scheme (HEAS)
Reverse Mortgages (provided by private institutions).
Typically retirees accessing the equity in their homes do so for the following reasons:
To top up existing retirement income to have a more comfortable lifestyle
To reduce debt
To lend to family, often adult children as a ‘Bank of Mum and Dad’ lender
To travel
To renovate or maintain the family home
