The urge to save humanity is almost always a false front for the urge to rule. H. L. Mencken
Good one
Definition of a doom and gloomer from 1993 The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
thankyou, it is refreshing to spar with a gentleman who admits when he has been hit, not too common around here that's for sure
Housing either is an investment, like any other, or its not and should be treated as such in entirety...or not at all. Bulls want their cake and to be able to eat it too and that is the current situation we are in. Glad we agree on this one.
What the frell is the point in having a cake if you can't frelling eat it?
"If man is to survive, he will have learned to take a delight in the essential differences between men and between cultures. He will learn that differences in ideas and attitudes are a delight, part of life's exciting variety, not something to fear." - Gene Roddenberry
"Balloon animals are a great way to teach children that the things they love dearly, may spontaneously explode" -- Lee Camp
No, I've always understood the intent behind the phrase, but I'm a literalist, the word 'have' means to 'possess' or 'hold'. There is no reference to possessing the cake forever. I can always buy/make/acquire a new cake.
And anyway, I was being mildly facetious.
"If man is to survive, he will have learned to take a delight in the essential differences between men and between cultures. He will learn that differences in ideas and attitudes are a delight, part of life's exciting variety, not something to fear." - Gene Roddenberry
"Balloon animals are a great way to teach children that the things they love dearly, may spontaneously explode" -- Lee Camp
Reverse mortgages could become more popular as cash-poor home owners begin to retire and need extra money to fund major expenses such as positions in aged care facilities, according to Deloitte and the Senior Australian Equity Release Association (SEQUAL).
The take-up rate for reverse mortgages in Australia is very low, said Deloitte partner financial services James Hickey, who authored this year’s Deloitte annual Reverse Mortgages Report.
There are around 40,000 reverse mortgages outstanding in Australia now, representing only about 1% to 2% of retiree households, the report found.
“It’s interesting to think about why that may be, and in our view it’s the lack of awareness, the lack of understanding and the lack of support to discuss home equity release with retirees,” Hickey said.
Reverse mortgages were starting to gain popularity around 2005 to 2007 but the products suffered reputational damage when consumer groups came out with warnings that mortgage brokers had been pushing the elderly to take larger loans than they needed.
Several major lenders withdrew from the market when money markets froze during the financial crisis and it became difficult to source funds to back the mortgages.
Only $404 million of new reverse mortgage borrowings were approved in 2013, down from $714 million in 2006.
The major providers of the loans still in the market are Commonwealth Bank of Australia, Bank West and St George. Macquarie Bank relaunched its offering to the market in March.
Last year, the products were included under the National Consumer Credit Protection Act and all of the providers in the market are members of SEQUAL and are bound by its code of conduct.
Hickey said most people have around two thirds of their wealth locked up as equity in their homes when they retire but few think to access the capital to meet their spending needs.
Deloitte estimates that about half of the people who take out a reverse mortgage use the proceeds for regular income. About one third use the money to repay debt, such as a prime mortgage if they are retiring with an outstanding debt.
“It’s a very powerful mechanism to allow the retiree to maximise their cash flow in retirement if they are going into retirement with debt,” Hickey said.
Deloitte estimates about one in seven use the money for home improvements. Other common uses include buying a new car and taking a holiday.
SEQUAL executive chairman John Thomas said most retirees were conservative with their borrowings through reverse mortgages.
“We find with seniors they take what they need not what they can borrow,” Thomas said.
The average settlement amount was $71,000.
New reverse mortgages are only available to people aged over 65 years. The maximum loan to value ratios offered to 65 year olds is between 15% and 20% of the value of the home. The maximum LVR offered increases according to the borrower’s age. An 80 year old would be able to access more than 25% of the value of their property.
Hickey said lenders used actuarial models to determine the maximum LVR they would offer to people at each age. The maximums were low because there was no requirement for borrowers to repay the debt until they sold the property or passed away.
The lenders also provide a “no negative equity guarantee”.
“The lender wears all the risk ... If the value of the house should be less than the mortgage debt they cannot ask the borrower, estate or beneficiaries for any more money than the value of the home,” Hickey said.
While there is no requirement for people who take out a reverse mortgage to repay the loan until they die or sell the property, Deloitte’s research suggests that people typically repaid the loan in full after around seven or eight years.
A larger number of people repaid the loans in 2013 compared with previous years ($504 million discharges compared with $350 million in 2012).
Hickey said anecdotal evidence suggested that retirees with reverse mortgages had taken advantage of capital growth in the property market to sell their home at a profit and repay the loan.
There is no reason that the Pension Loan Scheme from Centrelink, which does RM's now, but only to the full pension amount, could not be extended and that interest gained would benefit all Australians.
A little-known government reverse mortgage scheme trumps those offered by the private sector in many respects, but curiously, the government scheme is only available to better-off retirees.
Reverse mortgages allow home owners to exchange equity in their homes for a loan that is repaid from the proceeds when the home is sold.
Private providers allow the money to be taken as a lump sum or as an income stream; though the vast majority take the money as a lump sum. As there are no repayments the interest on the loan is capitalised.
The debt can blow out over long periods. Care also needs to be taken in case there is any impact on age pension eligibility.
Centrelink and Department of Veterans' Affairs have a little-known Pension Loan Scheme where those on a part age pension, who own their own home or investment property, can take out a loan that is repaid when the property is sold.
The loan has to be taken as an income stream and is limited to that which, when added to the part-pension, takes them to the maximum pension.
The interest rate is 5.25 per cent and fixed, which is much lower than the variable interest rates charged by reverse mortgage providers.
But get these: retirees who are poor enough that they are on the full age pension and who own their own homes are unable to boost their income through the government scheme.
Yet, as the think tank, The Australia Institute points out, retirees whose wealth or income makes them ineligible for the full age pension are able to access the scheme.
Even more bizarrely, self-funded retirees who own property can access the scheme if they are ineligible for the age pension under either the income test or the assets test.
Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.
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