The Seniors Loan Specialist
FINANCE & LOAN OPTIONS FOR SENIORS
by Sandra Dignam
FROM AGE 50
From the age of 50 it gets increasingly more difficult to obtain loans. That’s not surprising as there is less time to pay the loan back. If you still have a job, you will be able to service a loan, but the loan term will most likely be shorter, with larger repayments, making an approved loan smaller and ever more difficult to obtain.
The Seniors Loan Specialist will be able to source loans from lenders who will give you the most favourable outcome. The lenders with possible favourable outcomes will, however, change frequently, depending on how policy changes are implemented to satisfy constantly changing regulatory requirements.
Many Finance & Mortgage Brokers do not provide Seniors Loans and yet, as a Senior, it will be most advantageous if you want a loan of any kind, to use a Finance or Mortgage Broker, especially one who specializes in Seniors Loans.
Paying for a Broker
The Seniors Loan Specialist does not charge for most of their services and is usually paid a commission by the lender who supplies the loan. A brokerage fee will only be payable if the service being sought is not one paid for by a lender. For example, some Bridging Loans are not paid for by the lenders or are only partially paid for. The Brokerage fee, if due, will be payable at commencement of the service.
FROM AGE 60 and NO LONGER WORKING
A Seniors Loan or a standard Reverse Mortgage can be a real Godsend to those reaching retirement with inadequate superannuation or savings to cover the rest of life. It can be hard when people discover that the pension does not provide for the lifestyle they are accustomed to or still dream of, or insufficient to cover the medical expenses they weren’t planning for. Maybe it’s a special holiday they would enjoy, or a project they would like to be involved in. Perhaps it is a whole bucket list still to be fulfilled.
What are your options?
Sell the Home and Downsize
The obvious choice and the one most embraced by those with inadequate funds, is to sell their home and downsize. This can be costly. On the selling side, costs include Real Estate Agency selling fees, which are typically 2.2% to 3.3% of the selling price, plus marketing and advertising costs, legal fees and moving costs. Then, on the buying side there is stamp duty and legal fees on the subsequent purchase, not to mention the emotional cost of searching and settling for something less than desired.
From this . . .
Many older people want to stay in their family home and remain in the area they are used to. They may be daunted by the idea of dispatching many of their loved possessions, packing the rest, and moving to a whole new area, away from their friends and family.
The Reverse Mortgage Option
There is however, a better option which is enjoying increasing popularity among those who want to stay in their existing home. They simply take part of the value of their home as a loan, and then use that to enhance their retirement. This is the Seniors Loan, otherwise called a Reverse Mortgage, and it is designed to provide Seniors with the financial freedom to enjoy their retirement.
A Seniors Loan option avoids the previously mentioned expenses, and at the same time takes advantage of the potential of greater capital gain, on the more valuable current family home.
Depending on your age, a set percentage of the value of your home can be taken as a loan, with no repayments necessary provided one of the applicants is living in the home. The amount available to be borrowed is calculated based on the age of the youngest borrower. The percentage able to be borrowed starts at 15% at age 60 and increases to 20% at age 65, 25% at 70, 30% at 75 and up to 35% at 80 years old and 45% at 90 or over
If the property is an investment or holiday home the maximum amount available is reduced by 10%.
A Reverse Mortgage cannot be secured against properties in some types of Retirement Villages, and the property must have a valuation of at least $200,000.
A minimum lump sum must be drawn on settlement. A cash reserve option can be arranged for the difference between the maximum approved loan and the initial lump sum taken at settlement. Additional amounts can then be drawn down as needed from the cash reserve. Alternatively, a regular payment option can be arranged for monthly, quarterly or annual advances over 5 or 10 years.
There are no mandatory repayments! Instead of making repayments to cover the interest, or pay back the loan, the interest due each month is added to the loan balance. There is a guarantee that, no matter what happens in the housing market, the amount owed can never become more than the value of your home. Repayments of any amount can however be made at any time.
A percentage of the equity of your home can be protected if desired. This option in turn decreases the maximum amount which can be borrowed.
Additional loan amounts can be applied for as applicants get older and the percentage of valuation allowable increases, and property value increase. A Seniors Loan can also be refinanced within the percentages allowable and the current valuation of the property.
The Reverse Mortgage Loan only becomes repayable when the last applicant passes away, moves into permanent long-term care or if the property is sold and the loan is not transferred to a different security.
Loan Purpose for a Reverse Mortgage
A Seniors Loan can be used for almost any purpose such as home improvements, motor vehicle needs, in home care, debt consolidation, permanent long-term care, day to day living expenses or to travel and live one’s dreams or fulfil a bucket list.
If you would like to take advantage of the equity you have created over your working life without selling your home, without incurring unnecessary expenses, without disconnecting from the life and social contact you are used to, as well as taking advantage of the potential of greater capital gain, this is the option for you.
When applying for a Seniors Loan it is recommended that you discuss your intentions with your family as well as investigate if your Center Link benefits or Government support payments or entitlements will be affected. Then you can plan the loan accordingly.
It is quite surprising how many of the next generation are so pleased to see their parents take on a new lease of life when they are provided more financial freedom. No longer do children need to provide for their parents, and the parents are so much happier to know they are providing for themselves from their own resources.
Legal advice will be required when signing the loan documentation
A WORD OF WARNING
There is a type of Seniors Financial Product where the lender buys a share of your home and becomes a part owner of your home. Although this is often called “equity release”, this is a Home Reversion Scheme. This product is not recommended by us.
This product is not a loan and you do not have full control over your home. It is not easy to get back full ownership, regardless of what you may be told, and it is more expensive than a standard Reverse Mortgage. Make sure you are taking a mortgage and are not selling part of your home.
Call The Seniors Loan Specialist on (02) 9653 2034 or 0414 903 443 to clarify your options in detail, in relation to your specific situation, your property, and your age, or for more information and understanding about any
Seniors Loan option.
The Seniors Loan Specialist will provide you with specific product information and how it applies to your requirements, as well as make sure you understand fully the loan product you are applying for.
*(this is for illustrative purposes only and not to be construed as the expected outcome for any individual circumstance or situation)
Home Value of $1,000,000 with annual increase in value of 8% per year
Seniors Loan of $100,000 at a rate of 8% per year (note current rate is 6.29%)
Value of the home after 10 years is $2,158,925;
Value of loan after 10 years is $221,399
Remaining equity has increased over the 10 years from $900,000 to $1,937,526
(02) 9653 2034 (preferred)
0414 903 443
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PO Box 280 North Sydney NSW 2059
73 Years Young & Independent
This fund has been granting funeral benefits for over 70 years. We used to be industry based and getting calls from the families of ex members for claims. We quickly realized that there was a demand for affordable funeral cover for retirees. On top of our discretionary fund The M Mortality Fund was formed in 2000 and began as a funeral savings fund. Contributions accrued compound interest and we have been able to maintain a decent rate at 5%. Being a not for profit the gains have been put back into the fund and the fund has been granted funeral contribution fund status through the Department of Fair Trading.
We then began to get a different set of enquiries: What if I haven’t saved enough for my funeral? That is when we got the members underwritten by an insurance company and gave members a choice of combining savings with Funeral Insurance. Our cover is a group policy making it cheaper and level premiums meaning the fees don’t increase.
I am happy to talk all day about the features of our fund and am happy to oblige if you call us on 1300 327 747
''Be realistic is my advice. If you have set aside more than you need then that will go to your estate. ''
This editorial is however more than just a straight advert for our fund I want to bring to you the of benefit of 30 years of experience that I have in this area. Firstly, everyone’s approach to planning for a funeral is different. Many clients I have spoken to are quite frank about their needs with many saying they want a basic funeral. Whatever your denomination or taste there is a cost and that increases over time. Be realistic is my advice. If you have set aside more than you need then that will go to your estate.
It is the people who give life to a fund like this. They are alpha and the omega. Take Keith (not his real name) member no. 1 ; he knew a good thing when he saw it and joined himself and his wife. He was an astute administrator who had retied and kept up the retired men’s association. Naturally he liked a beer and a chat but there was more to him, he was one of nature’s gentlemen and the church was standing room only at his funeral.
One of the observations I made when visiting the homes of grieving families is the immediate aftermath of one’s life gives a sense of peace or distress. The only way I can explain it graphically is the idea of the wake of a boat can be liked to a human’s wake. Are we sailing through calmly or thrashing about causing a stir.
Then there is member 4011, let’s call her Maggie, She had definite ideas about how much she wanted to spend on her funeral and where the proceeds should go, her grandchildren. She took out the insurance for $10,000 and savings the gamblers out there would term it an ‘each way’ bet. We even gave her a will kit.
When her daughter rang I paused for a moment to consider the transient nature of life and then went into service mode as I explained options to a grieving family member. I am pleased to say Maggie got to within $100 of her target.
''This fund was set when people understood the principle of mutuality
Did I mention the transient nature of existence. I would like you keep this in mind as you are going to purchase the means to put a punctuation mark at a significant interval of your life. This fund was set when people understood the principle of mutuality. These days it would be closer to the 80/20 rule. It is arbitrary but what is implies is that the bulk of people support the people that need to use the service now. I only mention this because I see how people have come to have certain expectations when they enquire about a service and this one is no different.
We are here for the long term, it is no secret but often neglected that the earlier you start to plan for any economic purchase you have an advantage. We are finding that many people in their 70s are enquiring and we are proud that we can actually offer an economic solution to their request. People still think that there is room to move in trying to bring the price down. However, with limited time, the amount of options available to you are reduced. Even then, if people realised the power of compound interest, they would be far better off investing in the savings fund.
''no matter who you are, you are who you are, you are worthy of living a life and ending that life in a dignified manner
This takes me back to my work in the discretionary mutual fund. There was a system of grants that were standardised, and there was an option to request a separate grant for hardship. I bring you the case in point of one of my unforgettable clients, let’s call him Fred. My first observation is that war heroes are not all statuesque. Fred was all of 5’2 and he had displayed heroic efforts in no less than three different arenas. I first met him over a claim for assistance, due to a storm. He began to confide in me more and more, and eventually let me in on a problem that he had with fainting. On one eventful visit after he had exhausted many of his medical options, I took him to the hospital to be further examined. It turned out to be a brain tumour that had been overlooked because it was behind a fold in his brain. That was the last time that I saw him completely lucid. Eventually he passed away and we paid the funeral benefit. The family appealed to me to raise more funds, as they wanted him buried close by and had exhausted all of his cash by paying out the mortgage. I raised half of the necessary funds and began petitioning all of the different community agencies he had been volunteering for. In the end, it was the church that came up with the rest of the money, and he received the burial that he deserved as a highly effective member of the community.
The word that is not used much anymore that applies here is dignity. When you look into its origins, it comes from deigned which is to be worthy of. This is at the heart of what is perhaps a very old fashioned idea, that no matter who you are, you are who you are, you are worthy of living a life and ending that life in a dignified manner. I guess the final example I will give you comes from a comedian called Ben Elton, where he had his main character explain that a thousand dollar meal (don’t be alarmed, some people pay this much for a meal at a benefit) is not a hundred times better than a ten dollar meal, which can be still found in some pubs and clubs. The philosophy behind the services at clubs is that again, the many contribute through memberships and other activities, so that services like reasonable dinners can be served.
So the things I want you to consider, are that when you contribute to a mutual organisation, don’t feel that you are being taken advantage of. For your turn will surely come and the strength of the organisation will ensure that it is still there at the time that you need it. I also want you to think about what it is that you really want for yourself. Because when you know what you want, the means becomes a lot easier.