Reverse mortgages a solution to financing retirement

26 November 2020

Research by the Royal Melbourne Institute of Technology (RMIT) released on 20 November 2020 reports that most Australians want to remain in their home as long as possible, but don’t have the funds to do so. Experts believe reverse mortgages could be the solution.

Australia’s leading reverse mortgage provider, Heartland Seniors Finance, engaged with RMIT to support research on financing ageing in place – that is, seniors ageing in their current home compared with moving into specialised care, or even moving at all.

RMIT’s research shows that almost 90% of senior Australians want to remain in their home for as long as they can – but limited superannuation and the rising cost of living is restricting the ability to fund ageing in place and provide for home renovations and a comfortable retirement.

Heartland’s Head of Operations, Sharon Yardley, said “we’re not surprised that the majority of Australians prefer to remain in their home as they age. However, we also know that this can be difficult to fund – especially for those living on the aged pension alone.”

RMIT suggests expanding the ‘traditional’ three pillars of retirement funding – pensions, super and private savings – to include equity release options such as reverse mortgages. Lead RMIT researcher on the project, Associate Professor Stuart Thomas, said “Australia has a high rate of home ownership and for many, superannuation and the age pension may not be enough to support them comfortably in late retirement. A better understanding of equity release and how it could be included in their retirement planning can lead to better quality of life for many retirees”.

“By releasing equity from your home, a reverse mortgage could help fund the cost of retirement and facilitate ageing in place,” explained Sharon. “Our customers commonly use their reverse mortgages to pay for home improvements to ensure their home is fit for retirement, cover the cost of in-home care, day-to-day expenses, and to consolidate debt, removing the requirement of regular loan repayments.”

“Our goal is to allow seniors to live a more comfortable retirement, with independence and dignity, free from financial stress, and in their own homes. Since 2004, we’ve helped more than 21,000 Australians aged 60 and over to release more than $1.2 billion of equity from their homes. We’re proud to help our customers to finance a more comfortable retirement in their home.

“Sponsoring this research allows us to further understand the current economic environment for retirees, the needs of senior Australians, and how innovative financial products such as reverse mortgages can assist seniors in meeting this need.”

See the full report here.

Report key findings

  • 93% of older Australian homeowners would prefer to remain in home ownership.
  • 87% of those aged 65-74 want to stay where they are, or within 10km of their current home.
  • Almost 90% of older Australians say they wish to age in place – that is, to remain in their current home compared with moving into specialised care, or moving at all.
  • 36% of older Australians live in a home that may be unsuitable for ageing in place, without upgrades or renovations.
  • Approximately 29% of seniors say they will not be able to afford the changes required to make their home age-friendly.
  • 25% of respondents believed they could afford the costs of aged care, and 40% simply did not know whether they could afford aged care costs in the future.
  • 13% of Australians already plan to sell the family home to fund their retirement, with a further 42% undecided on what they will do.
  • To release equity, downsizing does not appear to be a preferred solution for older households due to the costs (both financial and physical) involved and the negative impact it can have on housing and neighbourhood satisfaction.

Information is accurate as of 26 November 2020 and may change from time to time.