With property values continuing to rise across Australia, many over-55s are increasingly finding themselves asset-rich but cash-poor. Additionally, carrying high-interest debt (bad debt) into retirement can be a significant source of stress for older Australians. Lingering credit card balances, car loans, or personal loans come with mandatory monthly repayments, which can eat away at your superannuation and age pension income.
The Alternative to a Debt Consolidation Loan
Typically, when Australians are seeking the ‘best debt consolidation loans’, they are looking for either a new personal loan or mortgage refinance. These traditional options will require you to make monthly repayments in the form of principal and interest.
At Your Home Equity, we offer an alternative to a secured debt consolidation loan through a reverse mortgage. A reverse mortgage allows over-55s to consolidate loans and high-interest debts into a facility that is secured by the equity you have in your home.
How Turning Debt Consolidation into a Reverse Mortgage Works
If you are over 55 and own, or largely own, your own property, you can use a reverse mortgage to refinance:
While a reverse mortgage can be a great tool for debt consolidation and improving cash flow for older Australians, it is important to understand that a reverse mortgage is also a debt. Although mandatory monthly repayments are not required, the interest on your new consolidated reverse mortgage balance is compounding, meaning you will be paying interest on the interest as it is added to the total loan amount. As specialist brokers, we explain in detail how compound interest works and provide you with comprehensive modelling and projections of your home loan and equity position over time so you are fully informed before making any decisions.