As the rippling financial effects of the COVID-19 pandemic spread, many seniors find themselves in a difficult position - particularly the many homeowners experiencing pressure from stubborn mortgage debt. A low interest rate environment and impacts on share investments have not made this easier.
Unfortunately, for some, this pressure has been building for some years.
A recent study, Mortgage Nation: The Great Australian Debt, from independent research company illion, found Australians are among the most indebted people in the world.
The study showed a large increase in mortgage debt among Australians aged 61-70, and those aged over 71. This correlates with other recent research showing more Australian seniors are entering retirement with debt.
While the ability to take a coronavirus "payment holiday" may currently be necessary for many seniors, it will ultimately lengthen the time required to pay off the mortgage. This is because payments are "deferred" - added to the mortgage's back end, resulting in both extended payment terms and potentially higher payments when normality resumes.
Whilst this temporary assistance by the banks may be welcome, seniors could be unusually hampered by the policy - the last thing most seniors need is to have a longer-lasting mortgage. Younger bank customers may not notice the impacts from payment deferrals so much, but seniors most probably will.
The other big issue squeezing seniors financially is lower income returns due to ever-lower interest rates and lower dividends. With the RBA cutting rates to an astonishing 0.25%, it is hard to see this issue turning around soon.
Being freed from this mortgage debt and lower income pincer movement will depend on individual circumstances, but some seniors might find the answer in the actual home they are living in.
Accessing an equity release solution allows senior homeowners to unlock some of the equity in the home. Homesafe Wealth Release®, which offers a unique debt free equity release solution, has assisted many seniors pay off their mortgage using this method. In fact, using debt free equity release to tackle mortgage debt is among the most popular uses of this strategy. Homesafe Wealth Release® is not a reverse mortgage or loan product and can assist seniors to achieve a comfortable retirement without worrying about compounding interest eroding the future equity in their home.
Equity release may also be used to supplement retirement income or even to fund important renovations which allow the homeowner to stay in the home longer.
*Terms, conditions, and eligibility criteria apply. Homesafe Wealth Release™ is available in 90% of eligible postcodes in Melbourne & Sydney.