Key Takeaways
- Reverse mortgages allow homeowners to access equity in their home without making ongoing loan repayments
- These products are often used by retirees who have high property equity but limited cash flow
- The Australian government offers a low-interest reverse mortgage option through its pension loan scheme
- Ethical IQ’s strategy uses this low-cost government funding to reduce home loan pressure and improve cash flow
- This approach can also be combined with other Ethical IQ tax strategies to increase tax savings and retirement income
Hello there. It’s Rick Leighton.
Today I’d like to share a smart strategy that could be a real game changer, especially if you haven’t paid off your home loan before retirement.
This strategy involves using a reverse mortgage.
Reverse mortgage products were originally designed for retirees who have significant equity in their homes but limited cash or liquid assets to live comfortably.
With a reverse mortgage, you can draw funds against your home and use that money for living expenses without needing to make regular loan repayments.
Instead, the loan balance — along with the accumulated interest — is repaid when the home is eventually sold or the estate is settled.
While this approach may not always excite children hoping for a large inheritance, it can be a very helpful way to maintain your lifestyle after many years of hard work.
Now here’s where things get particularly interesting.
The Commonwealth Government offers a reverse mortgage-style loan that is significantly more attractive than most commercial reverse mortgage products.
The interest rate is extremely low, around 3.55%, which makes it far cheaper than most other borrowing options.
And the best part is that the loan is not income tested, meaning you may still qualify even if you’re continuing to work.
With Game-Changing Strategy Number 9, this affordable government funding can be used to help reduce the pressure of your home loan and improve your financial position heading into retirement.
It can even be combined with Game-Changing Strategy Number 7 to further increase your tax savings.
Even if you don’t fully eliminate your home loan before you stop working, this strategy can still significantly improve your cash flow.
Because a reverse mortgage does not require ongoing monthly repayments, those payments can effectively be deferred until the property is eventually sold.
At the same time, the tax benefits generated by other strategies can continue to support your cash flow.
While the government may not have originally intended for the program to be used in this way, the approach remains fully compliant with both tax and superannuation laws.
To find out more, talk to us at Ethical IQ Advisory — Australia’s number one tax advisory firm for property investors.
You can book a complimentary strategy onboarding session by selecting Game-Changing Tax Strategy Number 9: Using Cheap Government Money to Pay Off Your Home Loan Faster.
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