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Home equity could help grow retirement savings
Putting equity from the family home could help retirees fund expenses, improve their income, and provide support to their families, a new retirement funding provider has claimed.
Household Capital, which former senator and Minister for Superannuation Nick Sherry has put his weight behind as chair, yesterday entered the market with a new scheme that would grant loans to home owners of their retirements.
The offering would use a low interest rate loan to transfer a portion of owners’ house values into their superannuation funds of investment accounts, while providing them with guaranteed lifelong occupancy of their homes.
The loans would be charged a variable interest rate beginning at 5.9 per cent per annum, in addition to a 1.5 per cent establishment fee that could increase based on home size and loan length.
Founder and chief executive of Household Capital, Josh Funder, said at a media briefing yesterday that Australian retirees currently held $900 billion in “untapped” home equity, with approximately 80 per cent of retirees owning their own home.
Despite this, he said that the average retirees’ retirement savings were exhausted well before death, with increasing longevity seeing the average retiree’s super balance exhausted only 10-15 years after leaving the workforce.
Funder believed that using home equity to fund retirement could improve retirees’ living standards, assist baby boomers in supporting their families with loans before their deaths, fund transitions to aged care accommodation, and help maintain their houses.
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Speaking to Super Review, the $70 billion fund has unveiled its new solution to address the ‘cognitive load’ of retirement as members enter their golden years.
New research has suggested it’s time to reconsider the home as a fourth pillar of the retirement income system, alongside the age pension, superannuation, and voluntary private savings.
New research has revealed over 60 per cent of retirees believe their super fund offers retirement income products suitable to support their retirement lifestyle.
Some retirees are “needlessly” paying two sets of fees and often more tax than they need to, according to the industry body.
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6% variable interest rate is too high on a home equity back loan with low LVR
Govt has an offering for aged pensioners via Centre Link at a much lower rate - albeit make sure you get well advised!!!