Our need to access credit doesn’t stop when we retire. Unexpected medical costs, home repairs, or family emergencies can all mean that we need some extra money.
During our working lives, we take access to credit for granted. From credit cards to car loans and mortgages, we’re used to borrowing money to buy what we need now and repay it later.
Those who borrow sensibly and make repayments on time are rewarded with a good credit score, meaning they have access to money when they need it.
However, that changes when you enter retirement. If you don’t have a fortnightly pay packet, or a savings account with a large balance, accessing money is a little more difficult.
A survey by CHOICE found that Australian retirees continue to face hurdles getting access to credit cards and have been denied a new credit card despite having income and assets they deem high enough to cover repayments.
National Seniors members have also shared their frustration with applying for a credit card, including self-funded retiree Christine,76, from Queensland, who was denied a credit card despite having “substantial assets”.
“I tried to get a credit card with a $1,000 limit in my name and not my husband’s and was denied. I am a self-funded retiree, with a super fund and property around $4 million with no debt and have been turned down four times.”
If you already have credit cards, then a cash advance is an option – but it’s a course of last resort when you consider the interest rate. Major banks charge a fee plus an annual rate of more than 21% on cash advances.
A more suitable approach for many of us would be to look at the biggest asset we have: the family home.
Selling up and downsizing might be an option, but that is fraught with uncertainty. The market can shift dramatically between sale and re-purchase and moving may take you away from friends, family, and a community you love.
Another option is a Household Loan from Household Capital, which allows you to unlock the wealth you have accumulated in your own home.
The Household Loan lets you draw on a portion of your home equity to receive a monthly or fortnightly income stream.
That way you can live the retirement lifestyle you deserve, without having to be concerned about every dollar you spend.
Home equity can also be drawn as a lump sum, or a mix of capital and income. Access to capital is important, because you may need a new car, want to renovate or repair your home, repay debt, or cover significant medical or dental expenses.
By using your home equity, you don’t need to draw on your income-producing assets and risk reducing your future income.
As a reverse mortgage, the Household Loan comes with a range of protections under the National Consumer Credit Protection Act (2012) (NCCP).
As a result of this legislation, reverse mortgages are among the most strictly regulated credit products in Australia, with clear consumer protections and market parameters at both the beginning and end of all loans.
Firstly, you cannot lose your home; instead, you can remain living there as long as you wish. You continue to own your home and retain the title. Because you don’t need to make regular repayments, there’s no default risk and you cannot be forcibly removed from your home.
You do need to meet some simple obligations: remain living in your home, maintain it, and pay the council rates and home insurance.
Secondly, the “no negative equity guarantee” clause in the NCCP means you or your estate cannot owe more than your home is worth, regardless of what happens to the value of your property.
Download our free e-guide 6 Ways to Use Your Home Equity.
Or use our Home Equity Calculator to calculate the equity in your home.
Prefer to speak to a real person?
Speak with one of Household Capital’s retirement specialists for a 15 minute no obligation call on 1300 699 624.
Or book a time that suits you to ask questions and discuss your needs. Schedule a call.
Applications for credit are subject to eligibility and lending criteria. Fees and charges are payable, and terms and conditions apply (available upon request). Household Capital Pty Limited ACN 618 068 214, Australian Credit Licence 545906, is the Servicer for the credit provider Household Capital Services Pty Limited ACN 625 860 764.
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