How to use property as the living means for one’s old age; reverse mortgage loan in Australia to secure life
June 25, 2015
Australia’s statistics state that the percentage of Australians whose age is above 55 and income is more than $50,000/year is only 4.7%. In fact, more than 65% of Australia’s old people depend on rental or property income to support their retirement lives. Below we will introduce two common patterns of using properties as the living means for one’s old age in Australia.
- Collection of rent:
If you have an investment property in early time, you can easily collect the rent. Even without an investment property, many Australian old people can also rent their spare rooms to obtain income.
Mr Edam, he lives lonely in a 4 bedroom house in Glen Waverley district in Melbourne. He does not have income and his savings is not much, and he does not want to rely on only limited government pension for life. So he rent two bedrooms to overseas students, and provides them with breakfast and dinner. This can bring Mr Edam weekly income of $600, and Mr Edam’s life become more colourful because of them. (This is called Home Stay in Australia, but because they need a lot of rooms to provide this service, so this kind of property usually located 15 km away from the central city area. If students study in the university of Melbourne and RMIT, Sydney University of science and technology, it is not convenient. Home Stay is suitable for students who have just arrived in Australia, or age under 18 who needs to live with adults.)
- Real estate reverse mortgages:
Real estate “reverse mortgage” is another living way for one’s old age. This means the owner who has the property right to raise a mortgage to financial institutions, and financial institutions carry out a comprehensive assessment with the age of the borrower, life expectancy, the current value of the property, the future appreciation, depreciation and the value of the property when the borrower died. After the assessment, financial institutions will pay cash to the borrower by month or year, this will continue until the death of the borrower, and then financial institutions will take back the property. Thus ensure that not only old people can live in their properties, but also they can use the money in advance for selling their properties. For example, if reverse mortgage a market price of $600,000 property to a bank, the owner can still in his property for the next 20 years, and obtain about $2,000 cash from the bank every month.
We found that, in fact, among all the Chinese old people, reverse mortgage is very rare. They prefer to get rental instead, because first home buyers can get $20,000 subsidy from Australia government. Many Chinese old people will buy an apartment after they get PR, in order to fully enjoy the government benefits, also make them and their children have more private space.