{"id":77,"date":"2018-06-18T16:32:41","date_gmt":"2018-06-18T06:32:41","guid":{"rendered":"http:\/\/bantacsfinancialsolutions.com.au\/Nblog\/?p=77"},"modified":"2019-02-01T16:53:29","modified_gmt":"2019-02-01T06:53:29","slug":"pension-loans-schemes","status":"publish","type":"post","link":"https:\/\/bantacsfinancialsolutions.com.au\/Nblog\/pension-loans-schemes\/","title":{"rendered":"Pension Loans Schemes"},"content":{"rendered":"
\n

Rising life expectancies mean more and more retirees are finding themselves asset rich and cash poor. One option is to downsize to a cheaper home, but if they are receiving a part age pension now, converting an exempt asset \u2013 the family home \u2013 to an assessable asset such as cash or shares could mean a severely reduced pension or even total loss of the pension.<\/p>\n

As a result, many retirees take the reasonable view that they are better off to battle along in their present home which, if history is any guide, should continue to give them a reasonable tax-free capital gain.<\/p>\n

Taking out a reverse mortgage involves making some significant decisions. If you take a fixed rate there may be hefty exit fees down the track; if you take a variable rate you could suddenly find yourself in strife if property prices fall when interest rates rise again.<\/p>\n

Enter the Pension Loans Scheme: a type of reverse mortgage offered by the federal government.<\/p>\n

The new rules take effect from 1 July 2019. From that date a couple on the full age pension could receive an additional $684.10\/fortnight ($17,786.60\/year) between them by way of this loan. It will be paid fortnightly, like the pension, and the interest rate will be a very reasonable 5.25%. The loan can be repaid on demand without penalty, but it would be reasonable to expect that repayment will come from the eventual sale of the family home.<\/p>\n

The amount a part age pensioner will be able to borrow will be the difference between the amount of the age pension they receive and 150% of the maximum rate of age pension. For example, if a couple received an age pension of $800 a fortnight between them, they would be eligible to draw an additional $1252\/fortnight ($32,552\/year) under the proposed system.<\/p>\n

The Pension Loans Scheme will be available to non-pensioners too. A self-funded retiree couple will be able to draw 150% of the maximum rate of pension, or up to $2,052\/fortnight, combined.<\/p>\n

The essence of a reverse mortgage is that no repayments are made on the loan, so it increases faster and faster. So, a valuation from a licensed valuer will be required on the house which will be used as security for the loan. There will be no cost to the applicant for this.<\/p>\n

Furthermore, the amount of the cumulative loan debt that can be accrued will be limited based on a number of factors, including the pensioner\u2019s age and their equity in the secured asset.<\/p>\n

That’s a welcome move. Think about a self-funded couple who borrowed the maximum loan of $53,352 a year via fortnightly drawdowns. In just 10 years the debt would be nearly $700,000 and in 15 years a staggering $1.2 million. A reverse mortgage is like a strong drug \u2013 good in small doses in the right circumstances.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Rising life expectancies mean more and more retirees are finding themselves asset rich and cash poor. One option is to downsize to a cheaper home, but if they are receiving a part age pension now, converting an exempt asset \u2013 the family home \u2013 to an assessable asset such as cash or shares could mean …<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"link","meta":{"footnotes":""},"categories":[18],"tags":[],"class_list":{"0":"post-77","1":"post","2":"type-post","3":"status-publish","4":"format-link","6":"category-retirement","7":"post_format-post-format-link","8":"anons"},"yoast_head":"\nPension Loans Schemes - Noel Whittaker's Blog<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/bantacsfinancialsolutions.com.au\/Nblog\/pension-loans-schemes\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Pension Loans Schemes - Noel Whittaker's Blog\" \/>\n<meta property=\"og:description\" content=\"Rising life expectancies mean more and more retirees are finding themselves asset rich and cash poor. 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