Leanne’s father was given an $82,000 advance on his home by a company called Homesafe. Thirteen years later, it took more than $300,000 from the sale price
t the age of 82, Leonard Wolfenden was shocked to realise that when he sold his family home – a property he had paid off decades earlier – he would be entitled to keep less than half of the proceeds.
Homesafe Wealth Release does not in fact provide loans, it is a home reversion company – the only one in Australia – which allows people over the age of 60, who own a home in certain suburbs of Sydney and Melbourne, to get money upfront in exchange for a portion of the sale proceeds when their property eventually sells.
“ I told what the figure was, he couldn’t even comprehend it. He had no idea that’s what he was going to have to pay,” says Leanne. Homesafe has executed more than 6,300 contracts with older Australians who own homes in Sydney and Melbourne since it started in 2005. “ difficult for consumers to … work out how much exactly they will be giving up if they decide to complete the contract at different points in time,” Hanewald says.
Sitting in front of a gas heater at his home in West Pymble in Sydney’s north, Ron Woodward says this precisely describes his situation. Hanewald says it makes sense that the percentage Homesafe takes of the sale proceeds is higher than what they pay out because they “take risks” – such as house prices growing at a lower than expected rate, or the person living longer than predicted in their contract. “But it seems a large difference, even with rebates,” she says.
Guardian Australia has asked Sherris, who is a globally recognised actuary, to examine the mathematical formulas used by Homesafe to calculate their potential share of the profits. “On the face of it, has some nice advantages,” says Sherris. “You limit the percentage of your house you’re giving up, so you know what it is compared to a reverse mortgage. But the financial assumptions underlying the calculations aren’t clear.”
“It’s an ethical concern,” says Sherris. “You’ve got these older customers… they’re just having to take for granted the numbers you are providing to them without any real explanation as to why those numbers are what they are.” “I thought: you know, it’s your money, you’ve given us everything we’ve wanted all our lives, you do what you want with it,” Cameron said.Multiple financial experts who spoke to Guardian Australia said a simple way to understand whether Homesafe offers a good deal was to compare the numbers with how much an individual would have had to repay if they took out a simple reverse mortgage.
“Mum would always bring it up: ‘I don’t know how much this payout’s going to be, when I go,’” he said. After she died and the property was sold, Homesafe took $944,000 from the sale, nearly four times the amount that they had advanced the couple eight years earlier, says Cameron. This was about 40% of the property’s sale price.
Jason Coppard, another solicitor told the Guardian he refuses to sign off on Homesafe contracts “because I can’t determine how much money going to get”. Homesafe said that all its customers are “encouraged to seek financial advice and this request is acknowledged by the customer in writing”.Speaking from the lounge room of her daughter’s Melbourne home, Gillian Davidson, a former dancer, struggles to remember the details of the Homesafe deal she signed in 2014. The 89-year-old knows she got a lump sum of $250,000 to give to her son to help him buy a home, but doesn’t remember what she understood Homesafe would receive in return.
Some of the customers and their families spoken to by the Guardian took issue with the initial valuation figure provided by Homesafe, which they felt was low, meaning they would have to sacrifice more of the sale proceeds in order to get the advance they wanted. Homesafe said that there had been very few occurrences over 19 years where a customer has sold the home for less than the market value determined by an independent valuer.
Left with just $235,000 from the sale of his property , Leonard couldn’t afford the apartment Leanne had found for him.
Malaysia Latest News, Malaysia Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Superannuation, wealth tax: rising incomes could see many Australians forced to pay moreFast-rising wages and asset prices will leave more Australians facing Division 293 tax on their income and deciding whether to pay it from their super.
Read more »
The number of older Australians waiting for a home care package has increased to over 68,000The number of Australians waiting for a home care package has increased to more than 68,000, with departmental officials conceding it is becoming harder to access the scheme.
Read more »
Older Australians game to find new ways to stay active through modified competitive sportWhile research from Flinders University shows that less than a third of Australians over 55 are engaged in sport at least once a week, sporting codes across the country are getting creative with their rules to help keep older people involved.
Read more »
Retirement communities could ease housing shortage while improving outcomes for older Australians, peak body saysBy freeing up more properties for families, over-55 resorts could become a crucial part of the puzzle addressing Australia's housing crisis, according to the nation's peak retirement living body.
Read more »
Older Australians pressured into paying unfair robotax debts will not be compensated, government saysFinance minister Katy Gallagher says people who felt intimidated into paying back ATO debts so old they are impossible to verify will not get their money back
Read more »
The conditions killing the most AustraliansMany of the most common causes of death in Australia are preventable.
Read more »