For years you've been planning to buy a caravan or motor home to travel around Australia when you finally retire. You've made plans, picked places that you want stay in and explore, and dreamt about all the adventures that you'll have living a nomadic lifestyle.
So the time has finally come and you've reached retirement. Congratulations! However now you have some really important decisions to make. Do you sell your family home to fund your retirement travel or is there another way?
For many people, selling the family home is not something that they really want to do. After all, it would be nice to know that you still have a home base if you need a break from travelling or one of you becomes ill and needs some specialist medical care. Plus your home may hold many special memories of raising your kids and spending happy family times together.
If you really don't want to sell your family home, there is another way to fund your retirement travels without using your savings or taking out a high interest personal loan or credit card. It's called a reverse mortgage and utilises the equity in your home.
How A Reverse Mortgage Works
As mentioned, you can take out a reverse mortgage on your family home and release some of the equity. The good news is that you don't have to make any repayments, as the loan will be fully paid out when the home is eventually sold.
A reverse mortgage also has a 'negative equity protection' which means that you can never owe more than what the home finally sells for when you or your family do decide to sell it.
You need to be aware of course, that interest will be added to the value of the loan on a monthly basis and will compound over the total term of the loan. This means that if you borrow around $50,000, you could end up owing around $232,000 if you've had the loan for 15 years. 1
Why Purchasing A Caravan Or Motor Home With A Reverse Mortgage Is A Better Option
When you purchase your caravan or motor home with a reverse mortgage you'll be paying a much lower interest rate than if you were to take out a personal loan. Plus you have the added advantage of not having to make any repayments if you don't want to.
A new caravan starts at around $40,000 depending on what you're looking for and the style of comfort that you want, while you'll need to pay from around $100,000 for a new motor home. Of course, you can buy a second hand vehicle which might cost you considerably less.
With a reverse mortgage you do have the option of making repayments if you want to or if you're worried about how much you'll end up owing when you do finally decide to sell your family home. We'll talk more about some ways you can do this later.
Of course, with any kind of on road vehicle, you also need to consider the ongoing costs such as registration and insurance as well as regular maintenance. Plus if you're planning to stay in caravan parks or camping grounds, you'll also have daily or weekly site fees.
There are however ways that you can reduce these site fees by being totally self sufficient with solar panels on the roof of the vehicle, a battery power bank to power your TV and lights and gas appliances run by portable gas bottles.
What Should You Do With Your Home While You're Away For An Extended Period
You have a number of options of what to do with your family home while you're away, depending on what you're going to be comfortable with. Here are some suggestions:
- You can rent it out. If you don't mind strangers living in your home, you can easily rent it out with a 6 or 12 month lease. Ensure that you engage a reputable property management company to oversee the lease and management of your home.
This has the added advantage of receiving monthly rental payments which you can either use to supplement your retirement income or to make repayments on your reverse mortgage. Or you could do a combination of both depending on what your financial needs are while you're on the road. The rent would also pay for maintenance on your home as well as council rates and lease management fees.
- You could let family members move into your home. If you have grown up children or other family members who are having a difficult time trying to save a deposit to buy their own home, you could let them move into your home and maybe charge a nominal rent.
- You could list your home on Airbnb as a short term holiday rental. You will probably find that you can earn more with short term holiday rentals than a long term rental agreement. If you like this idea, hire a property manager to take care of all the details as the house will need to be cleaned before each new set of guests arrive as well as consumables such as toilet paper will need to be topped up.
How much you charge will depend on what your financial needs will be, but you probably should ensure that you get enough to pay the rates and any maintenance that may be required. This could be a great way to help your children get into their first home.
These are just some of the options of what you can do with your home while you're busy travelling around the country. Generally this means that your home will be cared for while you're not there and you'll be earning some additional income as well.
All You Need To Do Now Is Plan Your Trip
Now that you know how easy it is to finally take that trip around Australia without having to sell your family home, all that's left to do is start planning your trip and packing the things that you want to take with you.