Should you sell your home to fund retirement?

24 November 2017

Australian seniors need more money to ensure comfortable lifestyle during their retirement years, according to the latest Retirement Standard recently published by the Association of Superannuation Funds of Australia. Based on the industry benchmark, single retirees who own their home and are healthy will require $43,665 per year to achieve a comfortable lifestyle, while couples will require $59,971 per year.

Sadly, not all Australian seniors have managed to save enough to fund their retirement. According to a survey conducted by Mortgage Choice, three out of five Australians feel they will not have enough money to retire.

Many seniors will rely on limited government pension, and may consider downsizing or renting and selling the family home to make ends meet.

While I am not averse to downsizing, as it can be a great option, before doing so to release funds in retirement there are some important considerations to be contemplated first.

3 things to consider before selling your home

1. The Age Pension assets test

The family home is usually exempt in the pension assets test, but selling it to free up cash to live on could lead to a reduced pension if it increases your assessable assets. Unless the excess proceeds of the sale will not be counted in the assets test, continuing to own and live in your own home may be a more viable financial option. As part of our application process at Heartland, we strongly recommend that you seek advice from Centrelink to help you achieve the best financial outcome.

2. Missing out on future capital growth

After years of strong growth, the median property prices in some Australian capital cities have recently slowed – but in many areas property values are still appreciating. So if you are living in a capital city, the long-term appreciation in value of your family home may be a significant source of future wealth. Assuming the price of your property continues to increase, continuing to own your family home may provide tax-free capital growth that could exceed other forms of financial investment.

3. Once you sell your home, it’s gone

Retirement is a major milestone in our lives, and it takes careful consideration to decide on lifestyle goals for this period. Some retirees choose to downsize, and have a sea change or relocate to a retirement village. However, moving to a different location or cheaper house also means you may be leaving your community, social network, and a home filled with memories where you have welcomed your family and friends, and felt safe and secure.

How a reverse mortgage can help

Instead of selling your own home and downsizing or renting, a reverse mortgage can be a great option to access your home equity while continuing to own and live in your own home. With a Heartland Reverse Mortgage, you can access the funds you need to live the retirement you deserve, while retaining the option of selling or downsizing in the future.

Heartland’s product is very flexible, and offers, in addition to a lump sum payment, an income plan through a regular advance that can provide you with regular funds that will supplement your other sources of income. You can also set up a cash reserve, so you can have funds available for your future needs such as emergency health care, holidays, home renovations, and help around the home. You don’t pay any interest on any undrawn amount, whether that is undrawn from the regular advance or cash reserve facility.

When deciding to sell your home, or to take a reverse mortgage, there are important factors to consider. To help you with your decision, we encourage you consult your family, a financial adviser or mortgage broker who specializes in retirement planning, or call the Heartland Seniors Finance team on 1300 889 338. You may also find our free Reverse Mortgage Insights eguide a useful resource.

Regards, Andrew


Information provided is accurate as at 24 November 2017 and may change from time to time