Beryl is a 76 year old woman receiving a single pension of $25,678 per annum, has a credit card debt of $15,000 and lives alone in her own home valued at $850,000. Beryl as a full pensioner is entitled to earn additional tax-free income up to $4800 per annum subject the Centrelink Income Test. This could potentially increase her annual tax fee pension income by up to 18% and make a difference to her life. This extra income plus a lump sum of $15,000 to retire her debt will help Beryl with the increasing costs of living.

To generate this extra tax-free income and lump sum, Beryl agrees to assign growth in 14.7% of her home equity to the Lender. She will continue to benefit from any future growth in the balance of her home equity (85.3%). This enables her to release $125,000 of interest-free capital (14.7% of $850,000) from her home enabling the Lender to distribute Beryl an additional income amount of $4800 per annum, eliminate her $15,000 debt and generate for her an investment return over the term of the program from the balance of capital which will be used as an offset against the income Beryl receives during the HIR^® Program term.

The extra tax-free income Beryl receives is priced at 4.5% of the capital release amount (4.5% of $105,750 = $4800 per annum after deducting the $15,000 credit card debt and Establishment Fee. The Lender deposits an additional tax free $400 every month into Beryl’s bank account and the Fund Manager generates a 3.5% pa investment return on Beryl’s undistributed capital ensuring most of her capital release amount is preserved over the HIR^® Program term.

HIR^® Program metrics

Home Valuation: $850,000
Capital Release Amount (CRA): $125,000 (released interest free capital)
Establishment fee (non-cash): $4300
Lump sum: $15,000
Loan to Valuation Ratio (LVR): 14.7% (agreed fixed equity value)
Income @ 4.5%: $4800 (per annum for as long as required) 
Home Valuation (after 10 yrs): $1,200,000 (ave growth @ 3.5% pa)
RCV (after 10 yrs): $95,000 (offset against income distributed)                                                 

For Beryl, the compelling part of the HIR^® Program is that it eliminated the worry Beryl had about her debt and income and was achieved without a negatively impacting her home ownership, domestic cash flow, savings, pension, superannuation, equity or home bequest value. 

Mary and John are 60 years of age and own a home valued at $1.6m.

They have two adult children in their 30s. Both Mary and John have elderly parents in their 80’s and both sets of parents live in their own homes. John’s mother Silvia has been diagnosed with mid- range dementia and requires external support to continue to live with her husband in their home who simply cannot provide the support Silvia needs. John and Mary decide to execute a HIR^® Program to release interest free capital from their home to generate an additional income of $14,000 per annum and a lump sum of $25,000 to help them with the immediate and ongoing funding requirements of in-home care for Silvia. In consideration for the interest free capital, growth in a fixed amount of home equity was contractually assigned to the Lender based on LVR providing a fair and practical solution for Mary and John.

HIR^® Program metrics

Home Valuation: $1,600,000
Capital Release Amount (CRA): $350,000 (released interest free capital)
Establishment fee (non- cash): $12,250
Lump sum: $25,000
Loan to Valuation Ratio (LVR): 21.875% (agreed fixed equity value)
Income @ 4.5%: $14,073 per annum for as long as required 
Consideration: Growth in fixed 21.875% of home equity  
Home Valuation (after 10 yrs): $2,200,000

Mary and John share growth in their home with Investors in 21.875% of their home equity which is fixed during the entire HIR^® Program term. After 10 years, they have received income of $140,730, a lump sum of $25,000 and their home has increased in value to $2,200,000 (ave 3.5% per annum). They owe a total of $350,000 (principal) plus growth of about $130,000 (21.875% of total home growth) less the RCV of about $278,000 creating for them a very strong nett position. The HIR^® Program has allowed them to help John’s mother on very fair terms and importantly without putting at risk their home ownership through exposure to rising interest rates or compounding interest.  

David and Sonia are self-funded retirees who are both in their mid- sixties with three adult children. They own a home valued at $2.5 million in the inner eastern suburb of Melbourne, an investment property valued at $950000 and have their own SMSF.  They are considering a HIR^® Program that could be taken out against either their home or investment property. They would like to earn more income to fund their travel plans over the next five years without selling their home or investment property. Because their home is mortgage free, they decide to convert some of their home equity into interest free capital to produce the required income and lump sum. They need an additional $20,000 per annum plus a lump sum of about $50,000. They plan to repay the HIR^® Program loan from the proceeds of the sale of their investment property over the next 10 years when they both will be in their mid70’s. 

HIR^® Program metrics

Home Valuation: $2,500,000
Capital Release Amount (CRA): $520,000
Establishment fee (non-cash): $18,200          
Lump sum:  $50,000
Loan to Valuation Ratio (LVR): 20.8%      
Income @4.5%: $20,331 pa        
Consideration: Growth in 20.8% of home equity  
Home Valuation (after 10 yrs): $3,400,000

David and Sonia share home growth in a LVR of 20.8%. After 10 years, they have received income of $203,310, a lump sum of $50,000 and they owe a total of $520,000 (principal) plus growth of about $185,000 less a RCV of $465,000 enabling David and Sonia to travel and a strong nett position that critically has not put at risk their home ownership.

Les is a 78 year old pensioner who lives in his own home valued at about $900,000 and receives the full pension of $25678. Unfortunately, Les has a home with a lot of steps inside and outside in the front and back of the home creating a potential health hazard for him. A recent medical condition has drained all his savings but this has since been resolved. He has a credit card which now has ballooned into a $ 7,500 debt and Les needs to spend nearly $30,000 to ensure all the steps inside and around his home are made completely safe so he can continue to live safely in his home. He does not want to go into care and does not know what to do given that he desperately wants to stay in his home which like many of his generation, means everything to him with all its happy memories.

HIR^® Program metrics

Home Valuation: $900,000
Capital Release Amount (CRA): $120,000
Establishment fee (non-cash): $4,200
Lump sum: $40,000
Loan to Valuation Ratio (LVR): 13.33% (agreed fixed equity value)
Income @ 4.5%: $3,400 pa 
Home Valuation (after 10 yrs): $1,350,000

With a HIR^® Program, Les decides to release $120,000 of interest free capital from his home that will not only pay for all the work on his steps enabling him to remain living in his home but he can also receive a small additional income amount of $3400 per annum (without impacting his pension). This will increase his annual tax free income by 13.25%. After 10 years, Les is 88 years of age, he has received $34000 in extra income, a lump sum of $40,000 and he owes $120,000 (principal) plus growth of about $45,000 less a RCV of about $66,000. His home has increased in value to $1.35m delivering Les a fair funding solution which does not threaten his home ownership and provides him with safety and peace of mind. The important takeaway for Les regarding a HIR^® Program is that it has been specifically designed for the older homeowners needs, enabling them to continue living in their own home by delivering them either an income supplement and/or lump sum on the fairest of terms that simply makes their lives less stressful but without putting at risk their homeownership, pension, savings, superannuation or home bequest value. A HIR^® Program homeowner will always own and remain living in their home until they no longer want to or are unable and the Lender’s growth will always remain fixed to the LVR throughout a HIR^® Program term.   

Helen is a 61 year old divorcee who lives in her own home valued at about $1,400,000. She has two adult daughters who live and work in other states and she earns a modest income by doing several part time jobs. Helen does not have much superannuation because she has spent most of her married life raising her daughters at home. Now she owns a home due to a divorce settlement but has very little income or super to show for it. She has spoken to her bank about a loan but they were only prepared to offer a reverse mortgage. Helen has plenty of equity in her own home but is frustrated with the lack of options available to her as a 61 year old. In the meantime, she has maxed out multiple credit cards totalling $45,000 which is stressing her and now commits to only paying the minimum due each month.

HIR^® Program metrics

Home Valuation: $1,400,000
Capital Release Amount (CRA): $450,000  (release of interest free capital)
Establishment fee (non-cash): $12,250
Lump sum: $50,000
Loan to Valuation Ratio (LVR): 32.14% (agreed fixed equity value)
Income @ 4.5%: $17,437 pa 
Home Valuation (after 20 yrs): $2,650,000                                                                                                                                                              

With a HIR^® Program, Helen can release $450,000 of interest free capital from her home, retire all her debt, receive tax free support income of $17437 per annum (under ATO tax free income threshold of $18,000) and can remain living in her home for as long as she chooses. After 10 years, Helen’s home is now valued at $1.9m (ave 3.5% annual growth), she has received $174,437 in extra income and a lump sum of $50,000 enabling her to retire all her credit card debt. Helen owes $450,000 (principal) plus proportional growth (32.14%) of about $160,000 less the balance of capital (RCV) of $350,000 placing Helen in a much stronger nett position. After 20 years, Helen’s home is now worth $2.65m. She has received a total of $350,000 in extra income and she still owes $450,000 (principal) plus total growth of about $385,000 less an RCV of $315,000. Helen is now 81 and decides to downsize her home and buy a nice ground floor apartment for $1,000,000 in the area. Her home is sold for $2.65m, she pays back the HIR^® Program of $520,000 and is left with $1.13m cash after settling on her apartment. Over a 20 year period, Helen has paid the nett equivalent of 19.25% of the current house value of $2.65m at redemption date to the Lender and was able to live happily and stress free during this time. This means Helen had notionally reduced her FEV from 32.14% to 19.25% reflecting a very positive financial outcome for Beryl. 

Robert and Sue are both 63 years of age and own a home on the north shore in Sydney valued at $2.8m. Sue’s mother Iris has been in good health, living alone in a 2 bed room unit in Gordon following the death of her husband 7 years ago. Iris slipped in her bathroom and was hospitalised with a fractured hip. Iris declined rapidly and both Robert and Sue were advised that Iris would need to be admitted to an aged care facility. They were in luck because they located a delightful place not far from Iris’s unit. Robert and Sue were advised to pay a small RAD deposit of $30,000 and then a Daily Accommodation Payment (DAP) amounting to $52 per day. The annual DAP cost would be $20,000 plus the deposit of $30,000. They then considered their options such as a reverse mortgage. Their major concern was their home ownership in the event of increasing rates and compounding interest? They discovered a HIR^® Program would enable Robert and Sue to release interest free capital from their home based on the LVR. To generate annual income of $20,000 (priced @4.5%) would require a total loan amount of about $498,000. An establishment fee (non- cash) of $17,400 and a $30,000 lump sum would be deducted leaving a total interest free amount of $450,600.       

HIR^® Program metrics     

Home Valuation: $2,800,000
Capital Release Amount (CRA): $498,000 (release of interest free capital)
Establishment fee (non-cash): $17,400
Lump sum: $30,000
Loan to Valuation Ratio (LVR):17.78% (agreed fixed equity value)
Income @ 4.5%: $20,600 pa 
Home Valuation (after 10 years): $3,800,000
Residual Capital Value (RCV): $405,000 (balance of capital after 10 yrs)        

Growth is assigned to the Lender in a fixed home equity value of 17.78%. It will not increase any higher so there is no risk to Rob and Sue’s home ownership. The aged care deposit of $30,000 was lodged (which they are entitled to receive back at the appropriate time) and an annual income of $20,000 per annum was generated that fully covered the annual DAP for Iris. After 10 years, they would have received $200,000 of income, a lump sum of $30,000 and their home would have increased in value to over $3.8m (ave 3.5% pa growth). Rob and Sue would owe $498,000 (principal) plus growth of $180,000 less a RCV of about $400,000. The financial solution is highly efficient and one that leaves Robert and Sue in a very strong nett position going forward whilst Iris continues to receive all that she needs in a safe and caring aged care facility.  

John and Barry are in their early 70s and they have an elderly mother who lives in a nice home in Surrey Hills, Melbourne. Their mother Doris is 92 years of age on a full pension and lives by herself. Both John and Barry noticed that Doris required significant help keeping the house clean and supporting her to take her medicine and attend medical appointments etc. The Federal Government provided Doris with a Level 2 home care package but this was very basic. They were advised that if their mother was going to continue to live alone in her home, she would need additional care and support. The brothers decided the best way would be to take out a loan on one of their homes as security so they could access funds to pay for PAYG in-home care services for their mother. They worked out that for $18,000 per annum, they could have someone attend to their mother’s needs every day and combined with the Governments level 2 package, this solution should be adequate. Rather than use one home, to be fair they agreed to split the loan. In order to generate income of $18,000 per annum, they would need a total of $420,000 (@4.5%) after deduction of the establishment fee?  Barry owns a home valued at $1,200,000 and John’s home was valued at $850,000. They agreed to split a loan facility.

HIR^® Program metrics                                                       

Barry  / John

Home Valuation: $1,200,000 - $850,000
Capital Release Amount (CRA): $210,000 - $210,000
Establishment fee (non-cash): $7,400 - $7,400   
Lump sum: $NA  NA
Loan to Valuation Ratio (LVR): 17.50% - 24.7%
Income @ 4.5%: $9000pa - $9000pa
Home Valuations (after 5 yrs): $1,400,000 - $1,000,000

Two HIR^® Programs are executed in this example using both brother’s homes. They need to generate $18,000 income per annum so their mother can ‘age in home’ but importantly, they know she is being looked after when they can’t be there. This is most important to both Barry and John. After 5 years, Doris passes away. Redemption occurs on both HIR loans. Both brothers each contributed $45,000 of income to their mother’s well fare. Barry owed $210,000 on his loan plus 5 years growth of about $30,000 less the RCV of about $180,000.  His total debt owed is $60,000. John owed $210,000 on his loan plus 5 years growth of about $30,000 less the RCV of about $180,000. His total debt is $60,000. A condition of HIR redemption when a family member dies subject a HIR loan is that the settlement date is extended out to 12 months (during this 12 months, growth accrual continues) to provide the family with the time to make decisions re matters relating to the deceased persons home. This will provide Barry and John with the time to sell their mothers home or leverage it to pay out both HIR loan accounts.  

David and Karen are healthy self-funded retirees in their late 6os. They are looking for additional ways to generate income to support a B&B plan that Karen has developed for one of their investment properties. They consider their income options and decide that they could use a HIR^® Program to release interest free capital of $400,000 from their investment property valued at $1.25m that they wish to convert to a B&B. David and Karen can generate $18,000 from the HIR^® Program in addition to SAPTO that could add another $2800 providing a nett income of about $20,800. This income would enable David and Karen to support the B&B when it is not being utilised by guests.

HIR^® Program metrics     

Home Valuation: $1,250,000
Capital Release Amount (CRA): $400,000 (release of interest free capital)
Establishment fee (non-cash): $14,000
Lump sum: $NA
Loan to Valuation Ratio (LVR): 32.00% (agreed fixed equity value)
Income @ 4.5%: $18,000 pa 
Home Valuation (after 10 years):  $1,630,000
Residual Capital Value (RCV): $346,000 (balance of capital after 10 yrs)

After 10 years, David and Karen would owe $400,000 plus growth of $160,000 less the RCV of $346,000. Their investment property has increased in value to over $1,600,000 but the integrated B&B facility has added an additional capital value of $100,000 since the venture has proved most successful with an occupancy rate of over 70% providing a nett income return exceeding their forecast.