Placeholder Image
money when you need it
Intelligent financial engineering  1300 133 350

Financial Solutions: Reverse Mortgages

Reverse Mortgages: The SKI generation Myth plus Guide

There is still a bit of SKI-ing going on with 9% of customers using the money to pay for a holiday.

A common perception about Reverse Mortgages is that retirees are living it up, draining all the equity out of their homes without a second thought about either their future needs or whittling away their kids' inheritance. A new term was coined as a result, the SKI generation, Spending the Kids Inheritance.

As with most good stories, that turns out to be completely untrue.

A typical Reverse Mortgage customer is 74 years old and is looking to borrow only small amounts of money to make life a bit less stressful. The average amount borrowed is around $70,000, which is usually only about half of the money available to them. So they are not frittering away money without a thought for the future.

What they are spending the money on is also not as glamorous as the SKI myth.

Recent research has show that making minor home repairs is the main reason (33%) for taking out a Reverse Mortgage. This has a double benefit for the customers as they make their house more pleasant to live in and also increases its value. Even just a coat of paint makes all the difference, as one lady commented, "I am not embarrassed by my home anymore." The second most common usage is to top up the pension (19%), with just a little bit extra each month transforming their life. One such SKI-er said, "I couldn't survive on the pension and keep my house.

The reverse mortgage loan has allowed me to stay in the home I love and has taken away everyday worries like whether or not I can afford to put petrol in the car." The product is also a lot more flexible now, with customers able to combine lump sums, lines of credit and monthly income options. This is a great help in minimising the Centrelink impact of the loan, which if structured incorrectly could reduce the benefits that the customer was receiving. There is still a bit of SKI-ing going on with 9% of customers using the money to pay for a holiday.

However, the most common destination is to go back and see families in the country the customer was born in, sometimes for the first time in 40 years. There is also a specific product available to assist family members moving into aged care called an accommodation bond loan. This allows funds to be borrowed on a short term basis and relieve the immediate financial strain.

The main message though in the research was the products provided stress relief, taking away the worries of how to survive day-to-day. And to reassure those family members who may be concerned that their parents are frittering away their inheritance; over 10% of reverse mortgages are repaid each year.

NB: Reverse Mortgages are a complex product and can have far reaching and unintended consequences. Always consult you financial planner or financial advisor before committing to a reverse mortgage.

The Essential Guide to Reverse Mortgages is a great reference article for those wishing to include a reverse mortgage in their financial strategy.

Financial Solutions: Reverse Mortgages

Popular Investment Articles:

Pproperty Finance: BRIC and Mortar to Boom

Buying Investment Property: Born Free -Taxed to Death

Investment loans & Articles - Managing your home mortgage and your investments require quite different approaches.

Investment loans & Articles - Managing your home mortgage and your investments require quite different approaches.

Investment Adice: City versus Suburbs

Home Loans Perth: parents helping Kids

ATO payg withholding tax variation for use to reduce the amount of tax your employer deducts from your wages or salary when you own an investment property.

Buying Property Checklist  A very comprehensive checklist to use when buying a property.

Lifestyle Finance Assesment Form to see just how you are tracking and to start your financial strategy.

Equity Finance - Debt versus Equity

Investment Strategy: High fliers or Budget Savvy Investors

Wealth Management - building wealth

Development Finance for property development

An extensive library of Checklists, Forms and Guides can be found in our archive library.

Loans to Lifestyle Home > Resources >  Financial Articles >  Financial Solutions: Reverse Mortgages
Business Solutions Cash Flow or ATO Tax Debt? Your turnaround solution starts here today.
Placeholder Image
Home Loans & Mortgages When the bank says “NO” - Even with poor credit! Call us for your Low-Doc loan.
Placeholder Image
Farm Loans Safeguard your Farm & Family's Future with our specialist farm loans.
Placeholder Image
Let’s get Social
Personal Finance Home Loans & Mortgages First Home Buyers Fixed or Variable Interest Low Doc Home Loans Home Loan Types Home Equity Loan Home Finance Articles Home Loan Rates Comparison Rates Bad Credit Loans
Business Finance Business Turn-arounds Small Business Finance Car Loans Equipmentr Financing Investment Loans NRAS Wealth Management Financial Review Development Finance
Financial Strategies Financial Analysis Financial Goals Financial Strategy Volatility Finance Options Financial Solutions Reducing Repayments Financial Strategies Equity Finance Commercial Property Investment Property Financial Protection Retirement Planning
Resources Calculators Why Us FAQ's Case Studies Contact Us Privacy Policy Site Map

© Copyright 2012 Loans to Lifestyle All Rights Reserved 81 Smyth Rd, Nedlands WA 6009 Ph: 1300 133 350