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CASE STUDY: How to use a reverse mortgage to help with the cost of living


Heartland Reverse Mortgages have said that over 30% of their recent customers have taken out a reverse mortgage to supplement their income and help with day-to-day expenses and cost-of-living increases.


Whether the purpose is to help pay the bills, purchase higher quality foods, or enjoy more weekend activities, a reverse mortgage could be used for almost any day-to-day expense to help reduce financial stress in retirement, and improve quality of life, while remaining in your home for as long as you choose.


But what could this look like in practice, and will you be able to borrow the right amount?


Let’s look at an example from one of Heartlands recent customers, David and Margaret*, who used part of their Heartland Reverse Mortgage to help cover day-to-day expenses.


David and Margaret's case study David and his wife Margaret own their own property in Melbourne valued at $1,000,000. At ages 63 and 72 (respectively) they applied for a Heartland Reverse Mortgage to repay $33,000 of outstanding debt, $25,000 of home improvements and an extra $2,000 to cover their solicitor and some other small costs, making up a total initial advance amount of $60,000. They also wanted to use their reverse mortgage to supplement their income, so they applied for a regular advance of $1,500 per month for 5 years, totalling $90,000. For their future needs, they also applied for a $30,000 cash reserve facility to enable them to apply for additional funds when needed if an expected expense comes up down the track. In total they requested $180,000, for which they were eligible, as it met Heartland’s credit criteria, with the condition that they refinance their debts on settlement. The maximum loan they may have been able to apply for was $230,000. Taking out a Heartland Reverse Mortgage helped them to support ongoing income, and removed the requirement to make regular loan repayments on outstanding debt. The removal of mandatory monthly debt repayments. The consolidation of debt, combined with monthly regular advances, helped them to manage their cash flow more easily with the peace of mind in knowing the total loan amount, including monthly compounding interest, was only repayable when they exited their home (whether on sale, passing away, or moving into long term, residential aged care).


If you have any questions or would like to discuss further how a reverse mortgage could assist you please give us a call on 1300 861 143.


*Names have been changed to protect the privacy of our customers.

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