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Can You Use Your Equity to Fund Your Retirement?

It used to be common to hold on to your home and hand it down to your children. Times are changing and with the rising cost of living, many retired homeowners are looking for ways to tap into their home’s equity to alleviate financial stress and maintain their standard of living. 

If you’ve owned your home for a few decades, it’s almost certainly increased in value – probably by a lot and you’ve likely paid off a large chunk of your mortgage. This means you have equity built up that you may be able to use to pay off the rest of your mortgage, boost your super or supplement your pension.


Access your equity by downsizing

Selling your property and buying a cheaper one is one of the most obvious ways to release your equity, which can then be used to pay off the rest of your home loan. If there’s anything left over, it could be invested or kept as savings.

Downsizing can have a number of benefits. A smaller property may require less maintenance and upkeep. Planning for the future, you can find a home that suits your needs now and in years to come – perhaps without stairs, closer to family, or in a location with easy access to shops and medical facilities.

There are a few things to consider before downsizing – it’s not right for everyone. You’ll need to factor in the costs associated with selling your property, and with moving. You’ll also have to find a new place to live and grapple with the emotional aspect of leaving the home you’ve built memories in over the years. 


Boost your super with the Downsizer Contribution Scheme

If you decide to downsize you may be able to put the proceeds from your sale towards your superannuation, using the Australian Government’s Downsizer Contribution Scheme. This scheme lets you contribute up to $300,000 from the sale of your home into your super. From 1 July 2022, the eligible age for the Downsizer Contribution Scheme is dropping from 65 to 60, giving more people access.


What if I don’t want to downsize?

You don’t have to sell your home to fund your retirement. The Australian Government’s Home Equity Access Scheme gives eligible participants access to a voluntary fortnightly loan, secured against their property. To be eligible for this scheme, you or your partner will need to be able to qualify for the age pension. You’ll also need to own property that you can use as security. 

Because the home equity access scheme is a loan, you’ll be charged interest and you’ll need to pay it back. If you’re considering this option, it’s a good idea to get independent financial advice first. 


What else to consider before using your equity?

If you’re thinking about using your equity to help with your retirement, you’ll need to consider the following:

  • Will it impact my eligibility for the age pension? 
  • How will it affect my capacity to pay for future expenses, maintain my home and afford aged care if and when needed? 
  • How will it impact my children’s inheritance? 

It’s a good idea to speak to an independent adviser to help you decide what is best for your situation. 


To find out how much equity you have on your Bluestone home loan, get in touch with us today.

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