Debt consolidation is a form of debt refinancing where you reposition debt to provide benefits in of improved repayment terms and improved repayment scheduling to suit your individual current and future needs.
An ASAG Equity Release can be the solution you’re looking for (80 percent of Australian seniors entering retirement are homeowners) in managing your debts, and here’s why for many Australian retirees equity release should be a part of your normal retirement planning consideration.
Throughout the mid-90s, house prices have increased at a faster rate than income, which has tripled the number of people carrying debt and mortgages into retirement.
The 2018 ASIC report into equity release and reverse mortgages — in particular (ASIC Report 586) and the RMIT 15 year study “Financing Ageing In Place” — identified that between 2010 and 2018 the percentage of Australian Senior homeowners entering retirement with a mortgage of $150,000 increased from 23 percent to 36 percent. Bringing with it are income sapping fortnightly or monthly mortgage repayment responsibilities at a time when retirement income was needed to live comfortably.
Paired with the ageing population trends, this leaves many seniors strapped for cash in their retirement. Equity release lump sum payments can be undertaken from a property even if there is an existing mortgage as long as the lump sum is used to pay off the mortgage in its entirety.
As no regular repayments are required in the terms and conditions of the equity release until the end of the loan, with repayment mortgage relief as a result improved regular income is generated to the homeowner at a time that is needed most.
When it comes to debt in retirement, the problem is that senior’s income is capped. Most senior Australians are living on the pension alone or a combination of aged pension, superannuation payments or savings and it can be hard to pay for anything outside the basics. It’s not enough to continue making payments for a mortgage or other debts, let alone live a comfortable retirement, free from financial dilemmas.
Some may try to get by accumulating more debts through credit cards or loans. But these financial products are not usually designed to fit in with a senior’s income and lifestyle. With making regular loan repayments and high interest rates, most are not able to keep up.
The sound professional financial advice would feature debt consolidation discussions and could include a single repayment made via equity release as a means of potentially lowering costs and complexity to multi loan facilities. Here the equity release would be used to repay the credit card loan or multi loan facilities.
Remember, no regular repayments are required to the end of the loan, which in the case of equity release, is defined as when you sell the home, move into aged care, or in fact when you pass away. This is one option.
Downsizing is also an option, where you can use the proceeds you’ll get from the sale of your home to pay off debt.
But recent studies show that over 83% of those aged 55 and above would like to remain in their home because of their emotional attachment to it, so downsizing isn’t always the best psychological option as it does involve leaving the property, and furthering the costs and inconveniences of selling and buying a smaller downsized property.
Due to the rising amount of seniors with debt, there is an increased demand for financial products that will be suitable for them. Taking out an equity release is an option that has been popular.
ASAG Equity Release is specifically designed to address the needs of seniors. This design includes:
1. Usage — Debt consolidation solution
ASAG Equity Release proceeds can be used for debt consolidation, turning outstanding debts into one lump sum. This lessens your stress and worries and enables you to live a better retirement. This is what most ASAG customers use their proceeds for.
2. ASAG Fixed Income Retiree Sustainable Term (FIRST) Account
Aside from debt consolidation, an ASAG Equity Release can be accessed as a regular installment for your income stream. This can be used for day to day costs future unexpected small emergencies, rather than the larger requirements of home renovations, a new automobile, medical costs, travel, and many more.
There’s no requirement to make regular loan repayments. Although, you can make voluntary payments at any time. The amounts drawn and total interest charged will be payable at the end of the loan, when you move permanently out of your home, move into aged care or when you pass away.
Learn more about ASAG Equity Release and how it could help you in debt consolidation in your retirement by contacting us.
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