Hi All
I was just surfing the Choice website looking for advice on video camcorders and found this article. Whilst dated Nov 05 it is very pertinent.
Many of is know about the Reverse Equity loans banks offer.
Using equity in your property you take out a loan with the bank to live on and repayments are capitalised against the future sale fo the home. If the loans / repayments are small enough to not exceed the home’s capital gain all is ok. If it does then eventually you may run out of equity.
However another deal is available ( as of Nov 05 article) called Home Revision.
Here Retirees actually sold the rights to their home ( =at a discount of 35%) to a Company for a cash lump sum and an ongoing monthly payment. The company also agreed to meet all maintenance and insurance costs and the original owners have a lifetime occupation. The Company on sold the right to others to finance the income stream I assume.
Sounds good?
Except that Company went bankrupt and now the original owners have no income and they may be turfed out by the new owners.
Very sad and good to ASIC is acting.
From what I can surf it is still available and moves are a foot to have it banned.
Peter 147
Retirees' homes at risk?
Choice Website 11/05
A reverse equity scheme has been placed in voluntary administration after buying 120 homes.
Online 11/05
Reverse equity products for older people enable you to stay in your house and get a lump sum or regular payment to supplement your income. The two main types are reverse mortgages and home reversion schemes:
Reverse mortgages allow you to take out a loan secured against your house. They work in the opposite way to a home loan. Interest is applied to your loan amount but no repayments are required so the loan sum increases. Your lender may end up owning a large part of your house. The lender allows you to stay in your house until you sell it, move out or die.
In a home reversion scheme, you sell part, or all, of your home to the company at a discounted price (usually between 35% and 60% of its value). You have the right to keep living in your home until you die or want to move.
When Joe, 58, from Melbourne heard a radio ad about Money for Living he thought his financial troubles had come to an end. Joe lives on a disability pension and found it hard to cover bills and expenses for his car.
Equity release scheme Money for Living was established in early 2004 and bought about 120 properties from retirees. It offered a lifetime tenancy to the former owners as well as home insurance coverage and property maintenance costs. They also received a lump sum payment, instalments or a combination of both. The scheme sold about 80 properties to third parties who kept up the payments to the former owners.
Joe’s house was valued at $350,000 and he received a lump sum payment of $80,000. The company also promised him a lifelong tenancy, a monthly instalment payment of $650 for 20 years and coverage of maintenance costs.
In late September Money for Living was placed in voluntary administration. Ferrier Hodgson was appointed as voluntary administrator. It was also investigated by Consumer Affairs Victoria and the Australian Securities and Investments Commission (ASIC). ASIC has started court proceedings alleging false and misleading representation.
Joe has lived in his house for 56 years, nearly all his life. The current situation has affected his health.
I was just surfing the Choice website looking for advice on video camcorders and found this article. Whilst dated Nov 05 it is very pertinent.
Many of is know about the Reverse Equity loans banks offer.
Using equity in your property you take out a loan with the bank to live on and repayments are capitalised against the future sale fo the home. If the loans / repayments are small enough to not exceed the home’s capital gain all is ok. If it does then eventually you may run out of equity.
However another deal is available ( as of Nov 05 article) called Home Revision.
Here Retirees actually sold the rights to their home ( =at a discount of 35%) to a Company for a cash lump sum and an ongoing monthly payment. The company also agreed to meet all maintenance and insurance costs and the original owners have a lifetime occupation. The Company on sold the right to others to finance the income stream I assume.
Sounds good?
Except that Company went bankrupt and now the original owners have no income and they may be turfed out by the new owners.
Very sad and good to ASIC is acting.
From what I can surf it is still available and moves are a foot to have it banned.
Peter 147
Retirees' homes at risk?
Choice Website 11/05
A reverse equity scheme has been placed in voluntary administration after buying 120 homes.
Online 11/05
Reverse equity products for older people enable you to stay in your house and get a lump sum or regular payment to supplement your income. The two main types are reverse mortgages and home reversion schemes:
Reverse mortgages allow you to take out a loan secured against your house. They work in the opposite way to a home loan. Interest is applied to your loan amount but no repayments are required so the loan sum increases. Your lender may end up owning a large part of your house. The lender allows you to stay in your house until you sell it, move out or die.
In a home reversion scheme, you sell part, or all, of your home to the company at a discounted price (usually between 35% and 60% of its value). You have the right to keep living in your home until you die or want to move.
When Joe, 58, from Melbourne heard a radio ad about Money for Living he thought his financial troubles had come to an end. Joe lives on a disability pension and found it hard to cover bills and expenses for his car.
Equity release scheme Money for Living was established in early 2004 and bought about 120 properties from retirees. It offered a lifetime tenancy to the former owners as well as home insurance coverage and property maintenance costs. They also received a lump sum payment, instalments or a combination of both. The scheme sold about 80 properties to third parties who kept up the payments to the former owners.
Joe’s house was valued at $350,000 and he received a lump sum payment of $80,000. The company also promised him a lifelong tenancy, a monthly instalment payment of $650 for 20 years and coverage of maintenance costs.
In late September Money for Living was placed in voluntary administration. Ferrier Hodgson was appointed as voluntary administrator. It was also investigated by Consumer Affairs Victoria and the Australian Securities and Investments Commission (ASIC). ASIC has started court proceedings alleging false and misleading representation.
Joe has lived in his house for 56 years, nearly all his life. The current situation has affected his health.
