A new debt product that facilitates funding needs for financial advisers' retiree clients has launched.
Household Loan, backed by specialist retirement funding provider Household Capital, enables retirees to draw equity from the family home to fund living expenses.
Chief executive Joshua Funder said the loan combines a retiree's home equity, superannuation and Age Pension to provide adequate, reliable, lifelong retirement funding while the retiree continues to live at home.
The loan can be used to top up superannuation or investment accounts, home renovations, fund health and aged-care costs and support family members with first home deposits and education expenses.
Funder said no commissions or trailing commission to brokers are paid and there are no break costs or hidden fees.
The loan ranges from $50,000 to $550,000. It charges a variable 5.9% interest rate per annum and 1.5% establishment fee.
Homes must be fully paid and is the principal place of residence.
The untapped home equity market owned by Australian retirees is valued at about $900 billion, Funder said, adding about 80% of retirees own their own home.
The loan is different from a reverse mortgage. It provides a low interest rate and low loan-to-value ratio, better customer experience and partnered distribution with financial advisers and superannuation funds, he explained.
In terms of adviser revenue, Funder said this depends on how long the advice is in place.
It's important to differentiate this product, Funder said, as Household Capital operates under an Australian credit licence and financial advisers are governed by an AFSL.
In delivering financial advice versus credit advice, advisers need to think about the long-term objectives of clients, he said.
That demarcation is important from a regulatory oversight point of view, Funder added.
Melbourne-based Household Capital was established three years ago to help senior Australians live well at home.
Former Federal Minister for Superannuation and Corporate Law, Assistant Treasurer and Small Business Nick Sherry serves as chair.