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Equity release critical for Australians to avoid ‘raiding’ superannuation

equity release superannuation

A recent study suggests more Australians aged over 55 are considering raiding their superannuation to pay off mortgages, highlighting the need for clarity around alternative strategies to eliminate mortgage debt, according to a leading equity release provider. 

Findings from RMIT and the Australian Bureau of Statistics revealed the number of Australians aged 55 to 64 still paying down their mortgage has jumped from 14 per cent to 47 per cent in 26 years. RMIT suggests more Australians may be tempted to use their super to eliminate this mortgage debt.

The RMIT report follows a recent ABC TV 7.30 Report investigation which said one million households in Australia currently have at least one person who is 65 years or older and in debt: and that half of all 50-year olds expect to retire at 67 still carrying mortgage debt.

Dianne Shepherd, Chief Operating Officer of equity release provider Homesafe Solutions Pty Ltd, says it’s concerning Australians may feel compelled to use super when equity in the family home could be a viable solution. “This issue highlights the need for more clarity on alternative strategies to pay the mortgage aside from raiding the hard-earned superannuation nest egg.

“Using superannuation to pay off the mortgage may diminish lifestyle in retirement, as people may then be relying solely on the aged pension.

“Releasing some of the equity from the family home may be a powerful alternative strategy which allows retirees to reduce or eliminate their mortgage and keep their super intact.”

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Ms Shepherd says paying off the mortgage is among the most common uses for Homesafe’s equity release product, Homesafe Wealth Release®, which is currently the only equity release solution providing access to a lump sum debt-free. “It’s important any equity release solution is debt free when paying off a mortgage, otherwise you end up chasing your tail with debt.”

She said escalating mortgage debt among over-55s shows the importance of considering the family home as the ‘fourth pillar’ of retirement. “The family home, as a store of wealth, has potential to become the fourth pillar of the retirement income system.

“This would allow more Australians to ‘age in place’ without being hampered by excessive debts such as outstanding mortgages.

“It’s vital the wider ageing population is aware of all their options and can access the stored wealth in the homes when they need it the most.” 

About Homesafe Wealth Release

Homesafe provides a debt-free home equity release solution where the homeowner agrees with Homesafe to sell a share of the future sale proceeds of their home in return for a lump sum payment today – the home is only sold when the homeowner chooses, or after the death of the surviving homeowner, with the unsold share of the sale proceeds retained by the homeowner or their Estate. Homesafe is not entitled to receive any more than the agreed share.

Homesafe Wealth Release® was established in 2005 in association with Bendigo and Adelaide Bank.