Equity Release products are also known as ‘home equity loans’ or ‘reverse mortgages’ and are relatively new in Australia.  These loans have been in existence for many years in the US and UK.  Research on the Australian market shows a change in the attitude of people towards equity release loans.  These loans help you get a bigger home if you do not have enough cash to make down payments and upfront costs.  It may also help older people who may own a house but do not have sufficient cash to meet other routine expenses.  

Equity release is aimed mostly at the retirees who have only their pension to rely on for their survival to unlock the equity in their homes.  The concept is well suited to retirees since they can take a home equity loan up to 25% of their property value as a lump sum or monthly in instalments. A third option allows them to use both lump sum and monthly remunerations in combination.  They need to verify their individual situation.  The loan is structured in such a way that it ensures that the borrower still has enough equity in the property at the time of discharge of the mortgage.  This full payment will not exceed the value of the property.  This means you can live in your house as long as you like.

With the cash provided by equity release, you will be able to meet the rising costs, services like home care nursing, replace or purchase gadgets or appliances, repair or improve your home to suit your changing needs and more. With an equity release loan you need not make loan repayments like the traditional mortgage so this suits the retirees who have lesser income.  You can also continue to live in your home.  The lender can seek repayment only if you decide to vacate the property permanently which can be done by paying the loan by cash in lump sum or form the sale proceeds of the property.  This full payment will not exceed the value of the property.  This means you can live in your house as long as you like.

Equity release products are somewhat complicated and can be expensive too if there is any change in your situation in the future. But experienced legal and financial experts can advise you to use the appropriate product that suits your circumstances.  SEQUAL is a voluntary body formed by the financiers who specialize in equity release products in which two government bodies ASIC and APRA participate.  The guidelines set out by this body for all the lending members ensure that the rights and interests of the borrowers are protected.  The websites of some lenders who specialize in equity release products have an Equity Release Calculator for Reverse Mortgages.  Equity Release loans should be approached with caution and it is always safe to deal with only the lender who has been accredited to distribute such loans such as members of MFAA.   

Equity Release provides the homeowner the certainty of the outcome, security of tenure and best of all peace of mind.