Home equity release
Using the equity in your home
If you are over 60, own your home and need some extra cash,
using the equity in your home is one option available to you.
However, using your home equity is a big step. Your home is
probably your most valuable asset so you must work out whether the
benefits outweigh the risks. Always seek financial
advice before you make a decision.
If you only need small regular amounts to top up your age or
veteran's pension, check out the Pension Loans Scheme offered by
the Department of Human Services and the Department of Veterans'
Affairs. The interest rate is significantly lower than commercial
equity release products.
When home equity release
might be suitable
Using your home equity may be suitable if:
- You want a small amount each year to supplement your income and
you can afford to do this for many years (most products)
- You need a lump sum for home maintenance or renovations so you
can stay in your home
- You want money for a critical need e.g. medical treatment
- You need a loan to secure aged care
accommodation until you sell your home
Even though home equity release might be suitable to people in
some circumstances, keep in mind that it is a long-term commitment
and you need to know all the risks.
When home equity
release is NOT suitable
Using your home equity may NOT be suitable if:
- You are spending much more each year than you can afford for
the long term (a better solution may be to bite the bullet and do
some serious budgeting using our budget planner)
- You want to give or lend money to your family (it may affect
your pension and you may need the money in the years ahead)
- The debt could eat into money you need in the future for
medical bills, aged care or home maintenance
- You are thinking of investing - because you would be risking
your entire home, not just the portion you are investing
You may come across companies that offer you an income stream in
return for the capital growth on your home (a property option).
While the cashflow may look attractive now, the income you
receive will probably be much lower
than the capital appreciation of your home, that you are forgoing.
These types of offers are unlikely to be covered by credit or
financial services laws, meaning you will not have access to
important consumer protections such as free external dispute resolution.
Types of home equity
Typically, there are two types of equity release products:
Equity release products should not be entered
into lightly. Consider your future needs and speak to your family
and obtain financial and legal advice before proceeding.
Last updated: 24 Aug 2015