The Family Home and Retirement Funding

Family home become too large and too costly to maintain?

Many people just like you who are approaching retirement may find they are asset-rich (house worth a tidy sum) but cash-poor (not enough $’s to retire in the lifestyle you want and deserve for yourself. Options of downsizing or taking out a reverse mortgage can offer solutions to your cash flow problem – are these the only options and what presents as the best solution for you, you would be asking?

Demand for financial solutions is on the rise, the Australian Housing and Urban Research Institute (AHURi) recently reporting on mortgage stress on older Australians confirms this. The report notes that mortgage debt for people over 55 has increased, this rise of over 600% has a massive impact on older Australians still repaying mortgage debt and those having equity tied up in the family home when income and cash flow becomes vitally important to living but may be more restricted as a result.

A possible solution of realising cash flow from the home is to downsize, sell the large family home and buy something smaller and less expensive. Yet often what you want to buy to retire into can be the same value as what you are selling, leaving you no better off! If it does work, it is an easy to understand strategy and can give you a fair amount of cash for your retirement.

Don’t just Downsize

We ask “Why just sell the family home, when other solutions are at hand which you may not be aware of and should be reaching out to us to discuss what may be a better route for you?”

On choosing to downsize by selling the family home and buying your new dwelling there are exit costs to sell (agents commissions and marketing fees) and also purchase costs like stamp duties. How best to cover these expenses and come out of it financially better off is to bring in a service such as Downsizer whose purpose it is, is to help you come out with more Dollars in your pocket than if you tried to go it alone

Usually achieved by determining the ‘best strategy’ to add value to your family home before you sell it and also in helping you find and negotiate on your downsize dwelling. Making you more money on the one side whilst saving you money on the other side. Can you see the value in this professional service?

You may now say that having more cash in the bank will affect your government pension, (the family home isn’t included in the assessment whilst your cash assets are) so we ask “are you wanting to suffer and just exist on the government pension or would you prefer to own more money and actually live how you want to live and deserve to live? This is all semantics anyway until Downsize for Retirement undertakes an assessment of your family home and your other assets and savings in helping you come to an informed BUT vitally important life decision.

OR you may want to consider the financial trap of a reverse mortgage just so you can hold onto the family home whilst making the problem a future problem for your beneficiaries. Before you go down this route thoroughly read the fine print and understand what you are signing away. They are doing this to help you yes, but appealing to the vulnerable and making a healthy profit off of you is questionable.

Your research will show you that Interest is charged (about 1% above bank rate) on the sum borrowed and you don’t have to pay back capital or interest while you live in your home. On selling the home you need to repay the debt you borrowed plus interest and the balance of the proceeds from the sale to you or your estate. One small consolation : You are protected in that the debt can never be higher than the equity in the family home.

Is it ever too late to start planning?

Plan for it!

We all need to plan our retirement in line with what we want in life, for ourselves, when we do slow down or retire; meaning a PLAN and taking ACTION is vital if you want to be part of a community who can actually afford to retire and if you can believe that you have the power and ability to make the right decisions (sometimes the hard decisions) to ensure you give you and your family every opportunity of achieving it.

Who to talk to depends on what you really want to achieve. Your accountant cannot give you financial planning advice. Your friends may mean well by you, yet unwittingly give you the wrong advice. A financial planner is totally limited in the advice that they are licensed to give (which excludes property advice) and a property professional cannot give advice either.

So who do you talk to ?

It makes sense to talk to a property professional who lives, breathes, analyses and knows property and how the numbers work. Get to understand what might work best for your circumstances from this professional who can only share knowledge in general without giving advice. Take this knowledge to your accountant to have the figures verified; do your own due diligence whilst continuing to give your property professional feedback on your thinking, concerns and requirements. You will soon know within yourself what the better option will be, come to an informed decision and follow the logic.

We are professionals in this space and yes we cannot give advice, however we can offer you insights, knowledge, understanding and show you how the numbers might work. We can show you what is needed to be done today to pay off your home loan faster, what needs to be done to continue to increase your financial independence and how ‘best’ to continue growing your wealth. We can then point you in the direction of other professional services who are able to verify the plan and offer advice.

And no, that is not your local estate agent! Their focus is on becoming your selling agent and most certainly do not take into consideration how best to maximise the value of your land, how to effectively manufacture equity into your property before you sell it and also do not take into consideration your current financial position or your future required financial position you truly need and nor to they concern themselves on what or where you will be buying next. So why even ask them?

This is a new and emerging space and you will not find a single professional firm who is able to take on the whole process for you. Downsizing for Retirement can, will and are great at helping people just like you!

Read “Mortgage Stress & Retirement” here