Personal Finance
Newcastle Herald
Thursday May 31, 2007
Q I am a 69-year-old widow and took out a reverse mortgage loan in 2004 for $40,000. Not for one moment even considering that I could live a lot more years. I chose not to make any repayments such as interest only, mainly because I cannot afford to. This loan was to enable me to have a few holidays and update my car. My property at the time of taking out this loan was valued at $200,000. Interest rate on the loan began at 7.7 per cent. It is now 8.5 per cent. I believe my property is now worth around $380,000. The crux of the matter is that no one can predict how long one will live, but do I stand a chance of losing my house altogether to the bank? What should I do?
A In the three years since you've taken out the reverse mortgage your property has increased in value by $180,000 which is much more than you borrowed. This gives you a great safety cushion. I am guessing that the debt is about $52,000 now so if you remain in the house for another 16 years, when you will be 85, it will be about $200,000. If the house appreciates by 4 per cent per annum, it will be worth over $700,000 then. If you are concerned about the debt rising, you could talk to your children if you have any, about helping you with the interest. It should only be about $4000 a year.Q Regarding the changes to superannuation from July 1, is income received tax free from superannuation assessed as income for the Seniors Health Card? Also the income limits for the Seniors Health Card have not increased since its introduction. I feel it should be indexed to the CPI. A retiree who does not have their assets in superannuation will be greatly disadvantaged if this is the case. A The definition for income for the Commonwealth Seniors Health Card is, according to the Centrelink website, "Adjusted taxable income". This is your taxable income plus net rental property loss, target foreign income (foreign income not normally taxed in Australia including fringe benefits) and employer provided fringe benefits in Australia. Therefore, as income received tax free from superannuation is not considered as taxable income, it is not included within the income definition.Send your questions to noelwhit@gil.com.au. Readers should seek their own expert advice before making financial decisions.
© 2007 Newcastle Herald
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