30 July 2014

Does Fear of Change Stop You in Your Tracks?

I’d like to tell you about two widows in their seventies, who have been best of friends for many years. Joan recently moved into a retirement village; Valerie still lives in her home of 40 years.

Soon after Joan settled into her new apartment, the retirement village announced an event that she knew her friend Valerie would enjoy. Excited about sharing both her new home and an afternoon together, Joan invited Valerie over. 

Valerie couldn’t make it, however, as she was waiting for the gardener to mow her lawn. Over the next few weeks Joan kept inviting, and Valerie was never able to come, mostly because of something to do with the house. Joan could see that Valerie was stuck with the pressures of maintaining a house that was too big for her.

Understanding this, Joan suggested to Valerie that she sell her home, and perhaps move into a retirement village like the one she was in.
But Valerie would have none of that: “That might be fine for some people,” she said, “but I can’t leave my home, it’s too important to me. Besides, I’m not ready to give up my independence.”

Who is really more independent?

There are thousands of seniors in Australia who are living either Valerie’s life, or Joan’s. In my experience, it is those living Joan’s life who have the most independence, and who live more fulfilled lives with less stress and more time to do the things they truly enjoy. 

What causes people to make the choice that Valerie continues to make:  to stay in a home that is too big for them, where many of their neighbours have moved away, and that is filled with memories but not people? The answer is often:  fear of change.

You would think that seniors, of all people, would be used to change. But there are some deep-seated reasons for this particular fear:

First, changing your home hits at the heart of two basic human needs: shelter and security. If you have lived in your home for some time, it is filled with memories, and familiarity, not to mention the fact that the mortgage is fully paid. This fear is also all about equating living in your family home with independence, and the loss of one means the loss of the other.

Second, is the fear of making a wrong decision, which can be even stronger for seniors. Many of us experience a diminishing confidence in ourselves as one of those side effects of aging. There is so much going on already that we can’t control, from our children leaving the nest to retirement (translate that as loss of job) to our bodies starting to behave badly due to age. We feel like we have no control, and what we don’t see is how well we really have done with those changes, taking control of the new reality and moving forward.

And third, there is a fear that is almost an exhaustion that we feel in anticipation of the move itself. We all have memories of what it was like in our pasts to move, and now that decades of “stuff” has accumulated in the family home, the idea of moving is overwhelming. 

Time for a reality check

A reality check will help any senior facing these fears to see their lives for what they really are, including the new opportunities just over the horizon. Let’s take that reality check and look again at those fears, in connection with this question: How do you want to live the rest of your life?

Valerie and others like her may think they are independent, but they are not. The house has become heavy with obligations, and they are weighed down by keeping up the maintenance needs. If Valerie would consider rightsizing, she could be considering retirement villages as one option. In that case she would never have to worry about yard maintenance, and could get help cleaning the house if needed.

The second and third fears, those of making the wrong decision and the fear of the move itself, are easily comforted if you choose the right people to work with. Educating yourself on your options, and pulling in all resources available, will make the process of selling and rightsizing one where you feel fully in control. And doing so now, before a crisis makes you move more quickly than you would like, will just add to the positive effect.  

Maintaining a life well-lived

As seniors, our goal is still to maintain a life well-lived, for now and for the future. Most of us are not fulfilled by endless waiting for service help, and rattling around an empty house waiting for it to be filled again only briefly during holiday season. In the scenario at the beginning of this article, both women thought they were comfortable with their lives. But we think that sooner rather than later, Valerie will realise that she is tired of the demands that staying in that home puts on her. We can only hope this epiphany comes before a crisis dictates a move.

In our experience, Joan’s choice of a retirement village is fast becoming the option of choice for many seniors who have made the decision to right size. Research shows, time and time again, that the vast majority of them are very happy with that choice. In fact, many lament that they didn’t make the choice sooner. 


Facing the fear of change and giving it a good dose of reality opens the door to looking at your choices for the lifestyle you would want for yourself. Whether you choose a community of other retirees or not, it is a choice for living a life that is independent, creative, secure, and sustainable, in the company of as many others as you would like.  This is an opportunity that by all means should at least be explored!

03 July 2014

How To Avoid Potential Pitfalls Accessing Equity In Your Home

This week, our guest Craig Hall from the National Information Centre on Retirement Investments continues his advice on equity release options for seniors. NICRI is a wonderful source of information, tools and calculators to help you make informed investment decisions for comfortable living in retirement. Visit www.nicri.org to access this wealth of information.

In his second article, Craig explains the various (and somewhat complex) options available for releasing equity in the family home.

Equity Release – What are the Options?download

In the previous article we looked at the use of Equity Release as an option for senior Australians to free up cash to cover one-off expenses or supplement income requirements.  Equity Release comes in a number of various forms. It can therefore be quite confronting and confusing to understand and to make a decision on which would be the best option for your circumstances.

So let’s look at the various options available that allow seniors to access the equity in their homes:

  • Reverse Mortgage

A reverse mortgage is a loan provided where interest and other costs accumulate and repayment is not required until a trigger event (such as death of a spouse) occurs. Providers can lend up to a regulated maximum percentage of the value of the secured property, based on the age of the youngest borrower/homeowner. The proceeds can be taken either as a lump sum, regular payments or a combination of both.

For Government Income Support (GIS) purposes the first $40,000 of the drawn proceeds that remains unspent is assessed after 90 days and any unspent drawn amount above $40,000 is assessed immediately.

  • Shared Sale Proceeds Arrangement

Seniors can enter into a part-sale transaction and receive a lump sum cash payment in exchange for a share of the property’s future value.  The facility is available for eligible property types in certain locations. The amount received is a smaller percentage of the present value of the share being sold because the senior/s retain all ownership rights and responsibilities for the rest of their lives.

Assessment for GIS is the same as reverse mortgages.

  • Property Option

Enables access to the future capital growth of the home as an income stream. The homeowner agrees to sell their home to an investor at an agreed value at a future time of their choosing, in exchange for a monthly income from the investor.
It is possible for the homeowner and investor to share in the capital growth of the property, however this reduces the amount of the monthly payments received by the owner. The homeowner retains full ownership of and responsibility for the property until the eventual sale and change of title takes place.

Payments received are not assessed as income for GIS.

  • Pension Loans Scheme (PLS)

Property owners of age pension age who do not receive a pension, or receive a part pension, can borrow payments up to the full pension against their property. If the debt is secured against an assessable asset, the actual pension payment may increase as the net value of the asset reduces, thus reducing the ‘top up’ or borrowed component.

  • Downsizing

Downsizing can free up equity while maintaining full home ownership. This is simply selling the existing home and purchasing a property of lesser value. Any surplus funds are then available for use.  Costs involved include stamp duty, agent’s fees, marketing fees and relocation costs.

As you can see, it can be daunting to not only understand each product but also to make an informed decision to choose the most appropriate for your circumstances.

Avoiding potential pitfalls images (18)

As with any major decision-making it is important to investigate all the benefits, conditions and potential pitfalls. The following is a list of handy tips for consumers considering equity release to ensure inappropriate decisions are not made.

  • Check if the provider is prudentially regulated and holds an Australian Credit Licence if required.
  • Check with the Department of Human Services (DHS) to see if it will affect your Government Income Support entitlements.
  • Check if the facility is portable in case you wish to move house and retain your equity release product in the future.
  • Seek professional legal and financial advice.
  • Check if you face any penalties or fees should you choose to exit the scheme, whether retaining or selling the property at a time of your choosing.
  • Ask the provider what your obligations are as far as maintenance on the property is concerned.
  • Ensure that, where applicable, regulated consumer protections are being met according to the National Consumer Credit Act 2009, such as offering a ‘No Negative Equity Guarantee’, providing you with a thorough pre- assessment for suitability of the product and providing the appropriate documentation and projections.
  • Ensure that your insurance cover is adequate.
  • Find out what your rights are if something goes wrong or a dispute arises and what external dispute resolution scheme your provider belongs to so you know where to go if you have a problem.
  • Find out what restrictions an equity release product will have on you in the future – for example if you wish to renovate or need to move into aged care.
  • Ask the provider questions about themselves such as how long have they been in business, can they give you any customer feedback and how can you deal with them in the future.

While potential problems may arise from accessing the equity in your home, being prudent in investigating and understanding all aspects thoroughly and seeking professional legal and financial advice will provide clarity and peace of mind.

For more information on Equity Release products and options: 

Refer to the NICRI booklet ‘Accessing the Equity in Your Home’ which is available by contacting NICRI Toll free on 1800 020110 or via email nicri@nicri.org.au or write to PO Box 1339 Fyshwick ACT 2609. You can also visit www.nicri.org.au to access a wonderful source of information, tools and calculators to help you make informed investment decisions for comfortable living in retirement.

Craig Hall - NICRICraig Hall is the Executive Officer Media and Communications at the  National Information Centre on Retirement Investments (NICRI) Inc. with responsibility for media and research. He produces the range of NICRI publications and factsheets covering superannuation, retirement income streams, investments, financial planning, equity release and redundancy for the general public. Before joining NICRI years ago, Craig worked in the investment and finance industry over a period of 13 years. Craig writes a number of articles for senior’s publications and contributes to discussion/consultation papers for Government.


   Linda Coskerie, Seniors Real Estate Specialist