New equity release model for seniors

equity release model for seniors

DomaCom has a new equity release model for seniors seeking an alternative to the reverse mortgage model and government Pension Loan Scheme.

Fractional property investment specialist DomaCom has announced an equity release model offering seniors an alternative to the reverse mortgage model and federal government Pension Loan Scheme.

The new fractional model works on a shared equity basis, allowing seniors to sell part of their property to investors while remaining in the property. Property owners would be expected to pay rent, which is fixed for life, on the share they have sold to investors.

“It is an ASIC (Australian Securities and Investments Commission)-registered financial product that operates in similar fashion to a syndicate,” DomaCom marketing manager Warren Gibson said.

“The only difference is that the title stays with the owner and DomaCom protects the investors’ interest with a mortgage instrument over the property. When the senior decides to sell the property, the investors will receive a share of the net sale proceeds in proportion to the amount they invested.”

For seniors concerned about keeping their house in the family, the fractional equity release model would allow other members of the family to use their savings or money from their SMSF to purchase part of the property, DomaCom pointed out.

“The flexibility of the fractional equity release model includes the ability to move out and rent the home to other people and retain the rent,” it added.

“This is particularly handy for seniors considering retirement living as they can road test retirement village living and can still go back to their home if they wish. This can also work for those wishing to do the ‘grey nomad’ trip or similar circumstances.”

The company also announced it had launched a campaign to gather expressions of interest from seniors with a preference for accessing equity in their homes rather than dipping into their superannuation or selling off other assets in the current market.

“Demand from seniors may also fuel interest in funding equity release by some of Australia’s largest financial institutions as well as bring the senior financial advice demand to the fore for financial planners and government,” it said.

Last year, AMP technical strategy manager John Perri said retirees who were considering increasing their income through reverse mortgages on the family home should tread cautiously.

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