Household Capital is offering brokers more options to act on the growing community interest in accessing home equity, after acquiring another business that will support clients who want access to the federal government’s Home Equity Access Scheme.
Reverse mortgage lender Household Capital is an Australian-owned, independent retirement funding provider founded in 2016. It has been offering its Household Loan reverse mortgage product through brokers, which allows property owners aged over 60 to access up to a maximum of $2 million.
In December 2022, the group acquired Pension Boost, another home equity business that helps customers apply for and access HEAS, a federal government scheme allowing older Australians to access non-taxable loans using the equity they have built up in their home.
Household Capital chief distribution officer, Paul Stratton (pictured above left), said the addition of Pension Boost meant Household Capital could now provide brokers and clients the flexibility of accessing the most appropriate product for their clients, whether that is HEAS or the Household Loan product.
Hartley Financial lending specialist Wendy Bennett (pictured above right), who has been offering reverse mortgages as part of her broking service menu for about 20 years, said she has written more reverse mortgages over the last 12 to 18 months than she had ever written during her entire broking career.
“In the last 10 years I’ve probably done about half a dozen of these, but just in the last couple of years I’ve done about 10. It’s not massive, but I am definitely seeing more coming through. Just today, I’ve had two enquiries from colleagues on reverse mortgages,” Bennett said.
Bennett said reverse mortgages are more in people’s minds now because a lot of older Australians might have a housing asset that is worth a lot more but might be cash poor, and don’t want to leave their homes. They appear as one of the most searched terms in relation to home ownership.
“People want to stay in their house and these products give them the option to do so,” Bennett said. “For example, they may have retired and are left with a debt that they can’t pay – this can help them pay that out, depending on things like their age, and the property valuation,” she said.
“I did one for a gentleman who was only 60 who didn’t want to leave because he had his family living around him. He was able to access equity to pay for some renovations, and we also left him with some money sitting there in reserve that he can use if he needs to in the future.”
Reverse mortgages typically offer flexible options for accessing home equity, including lump sum payments or regular income streams. People can start accessing reverse mortgages from the age of 60, with the proportion of the property’s value they can access increasing as they age.
Bennett said her clients are directed to the MoneySmart Reverse Mortgage Calculator to understand the financial impact of a reverse mortgage, and clients need to have their documents signed off by a lawyer, to ensure the ramifications of the product are understood.
She adds that it should be something discussed with the whole family. “None of the lenders require confirmation you have, but it’s important the family understands what you are doing, so they are not surprised there is not as much equity in the property as they might have hoped.”
Bennett has typically used Heartland Reverse Mortgages but is pleased to now have the option of using Household Capital. Bennett said the number of lenders in the market had fluctuated through the years, with not many wanting to do them right after the GFC and more recently the Royal Commission.
Household Capital said home equity could play a role in providing funding for refinancing an existing mortgage or other debts in retirement, increase retirement income to deal with cost of living pressures, or support moves such as downsizing, upsizing or rightsizing.
It can also be used for other things such as assisting children to access the property market or to pay the grandchildren's school fees, or to complete necessary home renovations or modifications so they can safely and comfortably remain in their family home for longer in retirement.
For pensioners and self-funded retirees with modest needs – such as providing a small amount of extra income or a lump sum payment to cover minor expenses – Household Capital said the government’s HEAS scheme could provide an appropriate low-cost option.
For clients who require a higher level of income or capital for more substantial projects or expenses, reverse mortgage products like the Household Capital’s Household Loan will enable them to borrow more, with the maximum loan amount recently expanded to $2 million.
“Home equity, together with super and the age pension, provides the full package for retirees and helps mitigate longevity risk,” Stratton said. “The fear of running out of money in retirement is very real for many retirees.”