Loan Scenario of the Week (07/07/2023)

Janette (aged 83) lives in her home in Sydneys Inner West. Her husband died several years ago, and she only has one son, Patrick.

 

Janette has around $200,000.00 in savings and shares. She relied on the pension for her income and receives a small amount of interest and dividends from her investments.

 

Janette has a Reverse Mortgage with a balance of approximately $60,000. She took out this Reverse Mortgage in 2018 to assist her son Patrick and his family. As Patrick is her only beneficiary, she wants to assist him now rather than him waiting to receive his inheritance.

 

Jannette is looking to increase her Reverse Mortgage as she wants to give Patrick another $50,000.00. She will give him the funds from her investments as this will have a nil effect on her pension. By gifting him the $50,000 it will increase her Centrelink assets but the reduction in her investments will mean a net nil effect. Jannette has visited a Centrelink Financial Information Service Officer who suggested this strategy.

 

Jannette wants to have $200,000 available for her future care and property maintenance. By having the increase limit on the Reverse Mortgage, along with her cash and shares, she will still have approximately $200,000 available.

 

The cost of doing the increase with her current Reverse Mortgage Lender is the same as refinancing with a different lender. So, we are refinancing the whole loan to a different lender that has a significantly lower interest rate.

 

The loan is not for ongoing expenses but to make sure she has funds in future for in home care and property maintenance. It has allowed Jannette to help Patrick considerably and she gets to enjoy watching the relief receiving this early inheritance has brought to her son.

(Names, locations, amounts, & other personal details have been changed to protect the client’s identity.)