Asset strategy


Published in The Daily Telegraph, May 2007

The rise of reverse mortgages for retirees is a cause for concern for Wealth Within chief analyst Dale Gilham.

He believes a better option for those who need extra income after they have finished work is to use the equity in their house to their own advantage, not the bank's.

"Banks have never invented a product with the consumer in mind,'' he said. ``Banks only have the bank in mind. They don't do it because they're nice, they do it to make money.''

He suggests retirees who need extra money should take out a loan against their home and invest the sum themselves, using the returns from the investments to supplement their retirement income, while still retaining control of their property.

"I believe we should be encouraging retirees to use the equity in their home to invest in assets that create income and capital growth rather than erode the value of their assets,'' Mr Gilham said.

"Not only will retirees retain the benefit of the capital growth in their home, but they will also gain from being able to adequately fund their retirement.

"People are living longer and longer these days.

"While they may once have lived 20 years after they retired, now they are living 30 years [past retirement].''

But if you have finished work, how are you going to convince anyone to lend you money, even though you own your own home?

"Instead of a reverse mortgage, set up the line of credit before you finish work,'' Mr Gilham said.

The local reverse mortgage industry has gone to extraordinary lengths to ensure people don't get hurt the way they did in Britain a decade ago, when elderly people lost their homes.

However, there is always the fear that rogue elements could slip through the safety net which was created by Sequal (Senior Australians Equity Release Association of Lenders) and take advantage of the unwary.

"There should be more investigation into reverse mortgages before they become mainstream [finance],'' Mr Gilham argued.


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