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There are many ways homeowners can extract some equity from their homes - whether via Homesafe's debt-free strategy, by selling and moving into a smaller and cheaper home, or by taking out a loan, often referred to as a reverse mortgage.
Whatever the option, it's a big decision with lasting ramifications.
With this in mind, what are some secrets to choosing the best equity release option for you?
Understand all the consequences of selling your home:
The consequences of downsizing will be both personal and financial: will it move you closer to, or further away from, family and friends? How much money is left over after all costs (e.g stamp duty) are paid for? Is there appropriate and affordable housing in the area you decide to live in?
Rushing into downsizing could leave lasting regrets. If you are leaving a big city such as Sydney or Melbourne for a cheaper regional location, if you ever decide to try and move back, this may be difficult.
Understand all the consequences of staying put:
Choosing to stay in your home raises key issues, such as, how long you intend to stay in your current home. Do you have enough 'in the bank' if you live longer than when you may think today?
Staying put could present other challenge - such as the ability to maintain your home and garden - for example, engaging a regular cleaner or gardener can make staying put much easier.
Consider all forms of equity release:
There are many different equity release options available, and every situation is different.
Generally, there are debt-based products and debt-free strategies. Debt-based options such as reverse mortgages or the government's Pension Loans Scheme act as a loan - while payments may not be necessary during the life of the reverse mortgage, these schemes capitalise debt, which is eventually paid in full when the home is sold.
Debt-free strategies include downsizing (in theory) and the Homesafe Wealth Release™ model, which is currently Australia's only equity release solution offering homeowners a lump sum, debt free.
Consider any potential debt aftershocks:
Any consideration of debt-based equity release must fully recognise the impact of compounding interest costs into the future. This is vital to avoid any "debt aftershocks" which may occur down the track.
Understanding compounding involves awareness of what happens to the debt if the facility is used for longer than first intended - this is because compounding interest can build surprisingly fast over a few years.
Homeowners should also understand how any potential interest rate rises might impact their loan facility.
Considering debt aftershocks must also include consequences for next of kin. Are you hoping to preserve a certain amount of equity in your home for next of kin? A key attraction to the Homesafe option is knowing you can protect a share of your equity which will stay in your hands from the outset - no surprises.
For more information please call Homesafe on 1300 307 059 or visit our website homesafe.com.au
*Terms, conditions and eligibility criteria apply. Homesafe Wealth Release™ is available in 90 per cent of eligible postcodes in Melbourne and Sydney.