How to release equity for retirees

Hi all, looking for some options for a friend. They are a retired couple with fully paid PPOR approx value $1.4m. What are viable options to release their equity to use if aim to deplete close to max to enjoy retirement. Both not currently working.

Thanks

 

Centrelink have a scheme ...

 

I don’t think that maximises releasing as much as possible from equity on the PPOR.

 

Sell the property and rent

 

Impact on pension?

 

They would lose pension if assets more than about $600,000

 

i think the best aim is to have a

So before retiring and whilst have jobs release equity and refi to a loan as long as allowable that also is below the asset threshold of holding cash in an offset. However if a retired couple didn’t plan ahead to do this, is there other options without having to sell down PPOR

 

Great thread, anxiously awaiting responses from brokers (expecting a no answer).

 

They would lose very little at $600k.

Assets limits for a part Age Pension (Residents)
Situation Current limit
Single Homeowner $593,000
Single Non-homeowner $809,500
Couple (combined) Homeowner $891,500
Couple (combined) Non-homeowner $1,108,000

 

You can't release equity, it is really borrowing money. And to borrow money you would generally need an income high enough to be able to pay it back. This could include income from super though.

There are also reverse mortgages where they lend a lump sum and then take it out of the property when sold, before or after death.

An informal reverse mortgage from children is also an option.

 

Ooops, was thinking of singles ...

 

As Terry has pointed out the product designed for this situation is a reverse mortgage; e.g. below

What is a reverse mortgage? | Heartland Finance

 

thanks Terry,
When I looked into reverse mortgages I think they didn’t seem to attractive. I think your previously posted something maxing out lending and loan term prior to retirement and then essentially using that as a LOC. I guess this is something to do before retiring for others as an option.

Can you also expand on what you meant about informal reverse mortgage with children?

thanks

 

So borrowing doesn't affect the pension?

 

Isn’t pension based on an assets test and PPOR is excluded. In anyway for non boomers you shouldn’t expect to get a pension and have to rely on super and equity from PPOR.

 

if your children are going to inherit property from you, you are giving them a large gift, so they could all chip in and lend you are extra $20k or so per year. This can supplement your income without affecting the pension. Kids benefit in the long run as you have kept a capital growth asset, which is CGT, rather than selling it and eating into the capital and reducing their inheritance.

 

balwoges is correct - the Home Equity Access Scheme (previously known as Pension Loan Scheme) could be very attractive for those who have reached pension age. Link below for details.

Home Equity Access Scheme - Services Australia

 

This is a really interesting option...

 

Any monetary gift to pensioner parents must be declared ... I think ATM $10,000 p.a. is the limit

 

@balwoges Seems like a great idea because unlike a reverse mortgage, you don't have to relinquish control at the end. Once inherited, the kids (or whoever) have the option to pay back the loan if they wish to.

This gives the parents the ability to enjoy their money, but the kids an option to "purchase" the house based on today's value + interest...