DomaCom is currently working towards an equity release product as part of the DomaCom Fund offering for Senior Australians.
DomaCom believes a fractional equity release product will be a viable alternative to the existing reverse mortgage model for Senior Australians because it will be based on an equity model rather than debt (which is the basis for the reverse mortgage model). Debt models are reliant on the availability of short term global cash to maintain funding, which is at odds with the longer term need of Seniors requiring equity release to fund retirement and aged care needs over the longer term.
The fractional model will also facilitate the incremental transfer of property wealth from one generation to another. Ultimately, Seniors will have the benefit of maintaining a reasonable standard of living and not being forced financially to sell and move coupled with a permanent right of residency in their home.
Funding sources for Senior Australians to meet Aged Care Needs
Downsize
Significant transaction costs
Lifestyle impact of relocating
Reverse Mortgage
Not well funded
Availability subject to liquidity of short term lending markets
Minimal lifestyle impact
Seniors do not need to relocate
Uncertainty about residual equity
Equity Release
Well funded
- SMSFs via the DomaCom Fund
- Attractive income yield PLUS capital growth on property
Minimal lifestyle impact
Seniors do not need to relocate
Progressive sale of equity
- Initial equity release to provide cash and fees
- Sell equity every 5 years to cover ongoing fees
- Fixed costs
DomaCom’s Equity Release – an elegant solution where the time horizons of both the Investors and the Seniors are more closely aligned.
*Sources: APRA Statistics. Deloitte, Dynamics of the Australian Superannuation System: The next 20 years 2013-2033
