For retirees struggling to maintain a comfortable standard of living, a reverse mortgage can seem like an easy option. But debt should never be the first port of call when the penny pinches and all other avenues should be exhausted before hocking the equity in the family home.
Tim Stoyles of Sydney Wide Investments and Mortgage Management says it's important people look at all the options. "We look at their specific circumstances and whether there are any alternatives where they could avoid drawing down that reverse mortgage, or use a combination of things to reduce the impact on their equity and net asset position."
One of the cases he is looking at now involves a 40-year-old man who is worried about his 73-year-old widowed mother. She has about $20,000 in her bank account and he would like to see her in a retirement village with good aged-care facilities. A reverse mortgage may ultimately be the only solution but it shouldn't be the first one on the list and Stoyles is examining other options first.
Other options include Centrelink benefit eligibility, drawing down super, looking at a combination of a limited reverse mortgage and investment, or financial arrangements with family members. However, if a reverse mortgage is the solution, then sound advice is needed on getting the right product.
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