New independent equity release service a first

Scott Phillips

With reverse mortgages and other types of home equity release gaining in popularity, a new equity release service has entered the market.

Smooth Retirement is Australia’s first independent equity release specialists, combining equity release advice and broking in a new all-in-one service.

In addition, the Perth-based company has this week launched a new free guide for consumers and industry – the first of its kind – which explains all the available types of equity release products, their different features, varying applications as well as the pros and cons of each.

“Equity release is complex and understanding how the different products work and which one is the best for you is challenging. And while access to independent expert advice is all important when planning retirement finances, the traditional channels can be cost prohibitive, and difficult to navigate, for many retirees,” said Smooth Retirement CEO and Managing Director, Scott Phillips.

“We set about creating a specialised service that is accessible (online or via a telephone), friendly, much more affordable and one which helps retirees learn about all of their available options and what’s possible.

Mr Phillips, a former banker and financial planner, said delivering a better deal to retirees was the motivation behind the creation of Smooth Retirement.

“We’re independent and not aligned to any lenders, providers or banks and we charge fully disclosed, upfront and fair fees, taking no commissions or kickbacks from lenders.

“We work with and/or refer to all the reverse mortgage lenders and equity release providers in the country and whether it’s a reverse mortgage, the Pension Loans Scheme or a part-sale property transaction, the most important step is proper planning and making sure if you do choose to use some of your home equity now, you have enough for your later years of retirement, including your aged care needs.”

Mr Phillips said there was currently 8 equity release style products on the Australian market, with more expected to come in future years. Current providers and products include:

  • Heartland Seniors Finance
  • Household Capital
  • IMB Bank
  • DomaCom Seniors Equity Release
  • HomeSafe Wealth Release
  • Pension Loans Scheme (Federal Government)
  • HomeStart Finance (SA)
  • La Trobe Financial (Aged Care Loan)

The growth of the equity release market is being driven by the nation’s ageing population, particularly the large number of baby boomers, many of whom are asset rich yet cash poor – and also retirees who can no longer rely on returns from record low interest rates.

An increasing number of this cohort are looking for ways of boosting income, refinancing debt or accessing lump sum capital without having to sell their homes and downsize.

The Federal Government has also contributed to this renewed interest with the expansion, and essentially ‘re-launch’ of its own reverse mortgage-style offering, the Pensions Loans Scheme (PLS), in July this year.

One of Australia’s most prominent and largest reverse mortgage lenders, Heartland Seniors Finance, has experienced a significant increase in enquiry and take up of its award-winning reverse mortgage product in the last three years.

“As Australia’s leading reverse mortgage provider, we have experienced unprecedented month-on-month growth in settlements and enquiries in recent years, particularly the last two years,” said Jeff Murray, Heartland Seniors Finance, Head of Distribution.

New market entrant Household Capital has gone from strength-to-strength since launching its reverse mortgage, known as a “Household Loan”, in March this year. The company now offers Australia’s lowest interest rate at 5.15% – currently lower than the Government’s Pension Loans Scheme at 5.25%.

More than a loan, Household Capital’s model enables people to strategically deploy the otherwise dormant equity in their home in ways that boost their income steam and improve their financial position in the long-term.

Also new to the Australian market is a retiree-specific offering from fractional property investment platform DomaCom. The company’s Senior Equity Release product was launched in July. This new generation part-sale property transaction is the first equity release product to be launched as a financial product with its own PDS. Like other products on the market, it can also be used to fund any purpose, including aged care.

DomaCom CEO Arthur Naoumidis said the benefits to seniors was quite compelling, with one of the biggest advantages being that the product was not postcode restrictive.

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