Downsizing to a small unit or apartment, moving to a retirement village or taking up residence in aged care are generally not what feature at the top of our retirement bucket list.
If you've been thinking that you want to spend your retirement in your family home, you're not alone. Research has shown that people who stay at home and remain in their community, surrounded by family and friends, experience better health, wellbeing and longevity.
Sometimes though, you might need to free up some of that capital tied up in your home. Many retired Australians don't have a huge super balance – after all, super came in partway through many Australians' careers, and at just three per cent! While you might not have a lot put away in super, you most likely saved in bricks and mortar.
Responsible, long-term use of home equity can provide a retirement income stream to supplement super and the Age Pension. Accessible via a reverse mortgage, your home equity can also provide a lump sum payment to top up your super, modify or renovate your home to make it comfortable for retirement or have a 'rainy day' fund for unexpected expenses.
While a reverse mortgage can provide a much needed boost to retirement funding, there's a few myths out there that need to be dispelled, largely stemming from poorly designed traditional reverse mortgage products from the late 1990s and early 2000s.
You cannot lose your home: you can remain living there as long as you wish.
You continue to own your home and retain the title. Because you don't need to make regular repayments, unlike a traditional home loan, there is no default risk and you cannot be forcibly removed from your home by the lender.
You do need to meet simple obligations; you need to remain living in your home, maintain it and pay the council rates and home insurance.
This is not possible.
The No Negative Equity Guarantee (NNEG) clause in the National Consumer Credit Protection Act, introduced in 2012, means you are protected by law and cannot owe more than your home is worth, regardless of what happens to the value of your property.
A traditional bank mortgage has to be repaid each month, which can impact your retirement cashflow. It also carries default risk if you're unable to meet those repayments.
However, there are reputable companies such as Household Capital that offer refinancing options. By refinancing with a Household Loan by Household Capital, you can free up your retirement income and not run the risk of the bank foreclosing.
Household Capital's Household Loan, which is a type of reverse mortgage, is helping to transform retirement around the country. It may be as simple as using your home equity to top up your retirement savings or draw a regular income stream.
You may need to refinance a bank mortgage or modify your home to make it safe and comfortable for retirement. You may want to be the 'bank of mum and dad' and help your kids and grandkids along the way.
Now your home can be both the best place to live and the right way to fund your retirement. Using home equity provides flexibility and choice, and allows you to enjoy the retirement lifestyle you deserve.
Try Household Capital's free calculator to see how a Household Loan could transform your retirement.