Raising Money from the Family Home:
common legal problems older people can avoid
factsheet 4
COMMON SCENARIOS
Reverse mortgage or equity release
loan products
George is shocked to realise that he must
now sell his house and repay the bank.
The repayment is also much more than he
expected—$154 000 after only five years.
Renting out a room
Susan lives in a big house. She is divorced and
her children are grown and live elsewhere.
Susan decides to convert part of her house
into a small, self-contained flat and rent it out.
Lorraine rents the flat. There is nothing in
writing. Lorraine is a difficult tenant, nasty
and demanding. Susan has asked her to leave.
Lorraine is refusing to go.
LEGAL CONSIDERATIONS
WHEN RAISING MONEY FROM
THE FAMILY HOME
Older people are often tempted by special
loan arrangements that allow them to ‘unlock’
the equity in their homes. These ‘reverse
When the home is sold, the loan and interest
is repaid. In many cases this is done after the
homeowner dies.
If you enter into a reverse mortgage after
18 September 2012, you cannot end up
owing the lender more than your home is
worth. This is called the ‘no negative equity
guarantee’. If your reverse mortgage was
entered into before that date, you should
check your contract to see if the no negative
equity guarantee applies.
If, like Anna and George, circumstances
change for a borrower, the terms of the loan
will impact on their life choices. George cannot
move out of the property without selling and
repaying the bank. If he sells the property, his
pension may be affected.
Some reverse mortgages are offered to people
as young as 60 years old. At 60, a person may
live many more years. Even a very small initial
loan will require repayment of a large part of
the sale price of a house sold 30 or 40 years
later. This can prevent a borrower from ever
selling or leaving the home. In some cases it
can contribute to a decision to stay at home,
even if staying at home is not ideal.
All loans are regulated. The law regulates the
way people are advised and how loan products
seniors legal and support service
Their bank advised them to get an equity
release loan for seniors that they do not have
to pay back until they leave the house or die.
They borrowed $100 000. Five years after
taking out the loan, Anna’s needs changed and
she moved into an aged care facility. George
wants to move into his daughter’s home.
Each year the borrowing costs such as fees and
interest are added to the loan balance. Usually
these loans have ‘compounding interest’ so,
over time, interest is charged on the interest
already added. Balances rise very rapidly.
George and Anna have owned their home
outright since 1985. Since then, house prices
have risen dramatically. George and Anna
decide to borrow against their property to
supplement their pension.
mortgages’ allow a person over a certain age
to borrow a percentage of the value of their
home. Usually there is no requirement to make
regular repayments until the home is sold or
no longer occupied by the borrower.
RAISING MONEY FROM THE FAMILY HOME
are recommended. If there is pressure to choose a
particular loan product, information about the loan
is not provided in full or the customer’s individual
circumstances are not taken into account, then
it may be possible to take action. Legal advice
should be sought by anyone who suspects there
may have been something unfair or unjust about
the loan transaction.
For some people, renting out a room or flat in their
house seems ideal. For people renting only a room
in their home, the person living with them will
normally be a lodger and so have limited rights, but
if the person is a tenant then that person will have
significant legal protection. A tenant usually
has exclusive use of either a separate flat or
part of a house and is not part of the household
of the homeowner.
It is sometimes hard to tell whether a person is a
tenant or a lodger. Lorraine is probably a tenant so
Susan may find it hard to evict her. Susan should
talk to the Residential Tenancies Authority to
confirm that Lorraine is a tenant and find out what
she can do.
QUESTIONS TO ASK YOURSELF
WHEN CONSIDERING RAISING
MONEY FROM YOUR HOME
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How much money do I need?
What choices do I have?
What will happen if my circumstances change?
What will happen if my care needs increase?
If an accommodation bond for an aged care
facility is needed, where will it come from?
If I rent out part of my home, which arrangement
is best?
Would it be better to rent out the whole home
and live elsewhere?
How important is it to me to maintain ownership
of my home?
If using the home to generate income, should
I speak to my accountant or the Australian
Taxation Office about tax implications?
2 I CAXTON LEGAL CENTRE INC. SENIORS LEGAL AND SUPPORT SERVICE
• How much do I value my financial and physical
independence, and how will my plans affect this?
• Have I sought independent financial and legal
advice about any ‘reverse mortgage’ or
other borrowing?
• Have I consulted Centrelink and taken into
account the possible impact on my pension
entitlements and on the tenant? Access to
rent assistance depends on the layout of
shared spaces.
• If I rent my home, have I considered my
obligations as a landlord?
CENTRELINK MATTERS
Any dealing with your family home that leaves you
with more money to spend may affect your pension.
Check with Centrelink before doing anything.
WHAT TO DO IF THINGS GO
WRONG
If you need help to manage your finances, talk to
an accountant or an independent financial advisor
(see factsheet 5 Talking about financial matters:
common legal problems older poeple can avoid).
If you are in financial difficulty and you cannot
see your way out, see a financial counsellor (see
factsheet 5).
There is legislation to protect borrowers from some
bank practices. Talk to a solicitor or the Australian
Securities and Investments Commission about
banking and financial products, especially if you
feel that you did not get what you expected or you
are struggling to meet your obligations.
Get everything in writing and read everything
before signing anything. Many people expect a
contract to be a single document but it can be made
up of lots of different documents, especially if it
comes from a bank. Keep copies of all documents,
loan agreements, rental agreements and any
correspondence sent or received.
RAISING MONEY FROM THE FAMILY HOME
USEFUL RESOURCES
Australian Human Rights Commission (2013) Your
Rights at Retirement: A Guide to Making Decisions
and Navigating Your Entitlements in Later Life,
Australian Human Rights Commission, Sydney.
Australian Securities and Investments Commission
(2009) Getting Advice: A Practical Guide to
Personal Financial Advice, Australian Securities
and Investments Commission, Sydney.
GENERAL ADVICE
Caxton Legal Centre
(07) 3214 6333
Department of Justice (07) 3239 3520
and Attorney-General
Legal Aid Queensland
1300 651 188
Public Guardian
(07) 3234 0870
outside Brisbane
Public Trustee
1300 653 187
(07) 3213 9288
(general enquiries)
Queensland Civil and 1300 753 228
Administrative Tribunal
Queensland Law Society
USEFUL CONTACTS
1300 367 757
(for referral to a private solicitor)
Relationships Australia
1300 364 277
SENIORS LEGAL AND SUPPORT SERVICE
Brisbane
(07) 3214 6333
Cairns
1800 062 608
Hervey Bay
(07) 4124 6863
Toowoomba
(07) 4616 9700
Townsville
(07) 4721 5511
If you do not live in Brisbane and need to find a
community legal centre or a seniors legal and
support service near you, look in the White Pages
or search the internet, or telephone Legal Aid
Queensland, a seniors legal and support service or
Caxton Legal Centre for a referral.
Caxton Legal Centre Inc.
© Copyright Caxton Legal Centre Inc.
1 Manning Street
South Brisbane Qld 4101
Telephone: (07) 3214 6333
Facsimile: (07) 3846 7483
Internet:www.caxton.org.au
This information is current at February 2015.
Disclaimer
These factsheets are intended to give general advice only and should not be used as a substitute for legal advice.
While every effort has been made to ensure the accuracy at the time of printing, the law is complex and
constantly changing.
No responsibility is accepted for any loss, damage or injury, financial or otherwise, suffered by any person acting or
relying on information contained in or omitted from this publication.
SENIORS LEGAL AND SUPPORT SERVICE CAXTON LEGAL CENTRE INC. I 3