Reverse Mortgages NSW: Loan Scenario of the Week
Mr L (aged 62) and Mrs L (aged 60) live in their house in Inner Western Sydney valued at 3 million dollars.
They currently have a mortgage of approximately $280,000 and a credit cards totalling to $15,000. The home is getting a bit tired, and they would like to undertake some renovations to freshen up the property.
Mr L is working as a warehouse storeman and Mrs L receives a carers pension for looking after their autistic son. Recent cost of living increases have meant that on their current earnings it is becoming harder to make the payments on their mortgage and credit cards. The plan is to refinance the debts and do the renovations with funds from a Reverse Mortgage. The value of the property and Mrs L’s age means they can borrow $450,000 and they intend to borrow the full amount.
To pay out their debts and renovate is expected to cost around $350,000. They may then use some of the funds to supplement their living costs. This will leave them with a cash reserve of $75,000 in case of emergencies and one-off expenses.
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In the next 5 to ten years, they will probably receive an inheritance from Mr L’s mother which they intend to use to reduce the balance on the Reverse Mortgage so they are not paying as much interest. With the expected inheritance they could pay out the Reverse Mortgage, but they want to keep the Reverse Mortgage like a line of credit in case of emergencies.
The loan has enabled financial freedom for the L family. They can get on top of their debts, complete renovations and free up their cash flow to manage living costs. It has provided them with great peace of mind.
(Name, locations and amounts have been changed to protect the client identity.)
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