If you find yourself in a position where you are asset rich but are struggling financially, then a Homesafe Wealth Release transaction may be an appropriate financial product for you.
A Homesafe Wealth Release transaction involves selling a percentage of your home for a lump sum payment. It is a convenient way of accessing funds for property maintenance, medical bills or your day-to-day living expenses without the stress of having to deal with significant interest or loan repayments.
Through a Homesafe transaction, you get the benefit of:-
- Remaining the sole registered proprietor on the certificate of title on your home;
- Being able to rent out your home, and keep the rental income;
- Being free to live out the rest of your life at your home, or sell when you decide; and
- Having the option of buying back the equity sold to Homesafe at any time you choose.
What is a Homesafe Wealth Release transaction?
A Homesafe Wealth Release transaction is different to a loan or reverse mortgage.
For a reverse mortgage, you borrow against your unencumbered property and interest accrues throughout the lifetime of the mortgage. In contrast, for a Homesafe transaction, you have the peace of mind of knowing that the percentage of the property sale proceeds that go to Homesafe will never increase beyond the initial agreement, with Homesafe only realizing their interest in the property after it is sold.
For instance, you may choose to sell 35% of the equity in your property to Homesafe for $150,000. You will not have to make any interest or principal repayments on this amount. Instead, Homesafe will only receive the payment for their interest after the property is sold.
What should I consider before entering into a Homesafe Wealth Release transaction?
Before entering into a Homesafe transaction, you should ensure that you are eligible.
To be eligible, you must be a homeowner at the time of the exchange of contracts, and you have to be 60 years or older. Moreover, you have to ensure that the land value of your property is at least 60% of the market value of your property based on an independent Homesafe valuer’s assessment.
You should also note that you will have to maintain building insurance on your property for no less than the minimum insurance amount provided in the independent Homesafe valuer’s assessment.
If your property is currently subject to a mortgage, you will need to discharge this mortgage either before, or at, settlement for your Homesafe transaction.
After your Homesafe transaction is complete, you will not be able to register any additional mortgages or other security on the property. As such, entering into a Homesafe transaction will limit your ability to use the same property to secure loans from other financial institutions.
Intention to Sell
To maximise the benefit of your Homesafe transaction, you should consider whether or not you intend to sell your home in the very near future. If you intend to move in the near future, the Homesafe transaction may not necessarily be the best option for you, as you will likely receive a greater selling price for the equity in your home, if you sold it on the open market.
However, you should also note that Homesafe offers an Early Sale Rebate in situations where you need to sell your property earlier than you anticipated originally. The Early Sale Rebate works to reduce the agreed percentage of sale proceeds to which Homesafe are entitled if you sell your property within a certain period of time. This period of time is usually between 10 to 15 years.
Beneficiaries under your Will
In many cases, our clients live in their properties until they pass away after entering into a Homesafe transaction. If you have children who are nominated as beneficiaries under your Will, their inheritance will be reduced as a result of you entering into a Homesafe transaction for your property. In some cases, your children may be financially struggling or vulnerable at the time that you pass away and as such, may be relying on their inheritance. It is your property, and naturally, your continued financial security should be your number one priority. However, you may wish to consider the effect the Homesafe transaction would have on any of your vulnerable and/or financially insecure children in the event you passed away and that they have sufficient accommodation after your passing.
* Given the nature of the Homesafe transaction, terms, conditions and additional eligibility criteria must be met before Homesafe can transact with Customers.