The new solution for seniors short on cash flow

by Madison Utley15 May 2020

Fractional investment platform DomaCom has launched a campaign around gathering expressions of interest from seniors who would prefer to access equity in their home to ease cash flow concerns rather than raid their superannuation or sell other assets in today’s depressed market.

The approach DomaCom takes for seniors’ equity release differs from more traditional reverse mortgage models and the government’s Pension Loan Scheme. The group’s fractional model is a shared equity structure, which means seniors can sell part of their property to one or more investors while remaining in the property for as long as they want.

Seniors who take out an equity release become part owners and part tenants, paying rent only on the percentage they do not own while still holding the title and having the permanent right of abode.

For example, consider a couple in their sixties who own a home valued at $1 million and are looking for access to $100,000 of that figure. DomaCom could sell 12.8%, valued at $128,000; the couple would receive $100,000 and the company would retain $28,000 to cover fees for the next five years.

The couple would then be able to choose between receiving the money as a lump sum or as a flexible monthly payment, such as $1,000 a month for the next 100 months.  

“It’s an ASIC-registered financial product that operates in similar fashion to a syndicate,” explained DomaCom marketing manager Warren Gibson.

“The only difference is that the title stays with the owner, and DomaCom protects the investors’ interest with a mortgage instrument over the property.

“When the senior decides to sell the property, the investors will receive a share of the net sale proceeds in proportion to the amount they invested.”

According to DomaCom, quantifying and tracking the demand from seniors may fuel an interest in funding equity release from Australia’s largest financial institutions and could bring senior financial advice to the fore for financial planners and government; as such, the group has asked seniors to register an expression of interest on their site.