Getting The Best Out Of Life

Sun Herald

Saturday August 30, 1997

George Cochrane

* MY husband is 75 and I am 70 with no children or relatives and we are in the position of asset rich, cash poor. We have an unencumbered unit worth about $450,000 and we really would like to enjoy our remaining few years. Could you advise us how would it be possible to sell our unit and still stay in it? We know of one company but they only pay 20 per cent of the value.

T M, Sydney

I UNDERSTAND that "home equity conversion" or "reverse equity mortgage" schemes, as they are sometimes known, are quite common in Europe. In such schemes, an investor pays up to 60pc of the value of the house to the occupant who then lives in it until death. To the best of my knowledge, there are only two such schemes in Australia. One is Advance Bank's Money For Living, which is probably the one you are referring to.

An alternative "sell then stay rent free for life" system is offered by the privately operated Selstay Pty Ltd. This is a scheme run by a real estate agent that matches investors with elderly homeowners. It pays a higher percentage, from 25pc to 35pc, as a down payment depending on the age of the home owners. No interest rate is applicable since the scheme involves selling the home at a proportion of current value to an investor who then takes possession on your departure.

There is a lease for life with no interest and no rent payable. The investor holds a title to the property and also a mortgage for the balance owing, just in case the value of the property falls. Call 9262 6177.

If you are a partpensioner who owns real estate in Australia, do not forget that you are entitled to apply for the Pension Loans Scheme from the Department of Social Security (DSS).

This allows you to top up your pension with a loan up to the full rate of pension. It is also available to people who could qualify for a pension under one means test (income or assets) but are disqualified under the other.

The difference between the part pension and the full pension paid under the scheme is a loan secured against the value of your real estate. You will be up for fees to establish the loan, quoted by the DSS as an average of $250, depending on the land title to establish a caveat on your title, and a variable rate of interest, currently 6.25pc. A $250 charge will be levied to discharge the caveat when the loan is paid off. You may have to repay your loan if you sell the real estate, otherwise it will be recovered from your estate.

© 1997 Sun Herald

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