How is EquiKey different to a reverse mortgage?
What is a reverse mortgage?
A reverse mortgage is a type of loan that allows you to borrow money using the equity in your home as security. Interest is charged like any other loan and is added to your loan balance. When you decide to sell, move into aged care, or die, the loan, plus interest and fees must be paid off through the equity in your home. The cost of the loan, and subsequently how much equity you or your estate gets at the end of the loan (when your home sells), depends on the interest rate and fees. The main issue is that as the interest compounds, the debt can grow and subsequently deplete your equity rapidly.
The example below shows how a homeowner’s equity depletes over the course of 15 years, based on a competitive reverse mortgage taken out by a couple (68 and 70 years of age, respectively) for $150,000.
How is EquiKey different?
With Equikey there is no debt, therefore there are no interest repayments, application fees or any ongoing fees.
You decide how much capital you need or how much equity you’re willing to release; Equikey values this equity upfront based on:
the value of your home;
your (and your partner’s) age;
any future plans to move or transition into aged care';
the location of your home;
and the type of property you live in.
EquiKey’s valuation acts as a guide price for investors. You can decide to accept or reject any bid an investor makes for the percentage of equity you are willing to sell.
If you were to sell 19% equity for example, an investor would receive 19% of the future sale value of your property. You or your estate would keep the remaining 81% of the sale proceeds. 20% better off compared to if you’d taken out a 15 year reverse mortgage loan.
EquiKey makes money through a flat rate fee of 5%, split evenly between the investor and the homeowner, to cover our marketplace costs and lodge the necessary documentation to ensure each party receives their share of the sale when the property goes to market. This means if you were to release $100 of equity, you would receive $97.50.