Reverse mortgage or downsize

Selling a Sydney apartment could boost super and fund a move to a cheaper area

NAME: Michele Mossop STATUS: Home owner who is planning for the future.

QUESTIONS: Do I sell my apartment in Sydney, unlock some capital, move out of Sydney and bolster my super? Or do I stay where I am and take out a reverse mortgage?

ANSWERS: Don’t sell up without renting and testing out the new location. Subscribe to the local newspaper for 18 months, talk to a long list of people in the area, including real estate agents, police, medical services and the chamber of commerce. A larger equity in your home will result in a higher age pension. Maximise your super contributions.

Michele Mossop, a photographer, bought her two-bedroom apartment in a beachside Sydney suburb 20 years ago when prices were low. Over that time, the value has climbed as the area has become sought after and old apartments like hers are in demand. “I love where I live. It is beautiful and sunny and a great apartment,” says Michele. She has renovated and the street has a conservation order.

But with such strong property prices, Michele is wondering if she should sell. She has a dream job as a freelance photographer. But she is looking to the future and would like to pump up the value of her superannuation. One way is to sell her apartment and move somewhere with lower property prices.

“I could use half of the equity from the sale of my apartment to boost my super and draw down an income when I retire.”

One of the advantages of having no children is that there is no need to leave an inheritance. She can spend the principal super amount as well as the income it generates.

Michele has her eye on two beautiful coastal spots: one six hours north of Sydney and the other close to Adelaide. “I could have a garden, a couple of dogs and be close to the sea.”

But she would miss her friends. What would be the cost of selling her apartment and relocating? Another strategy is taking a reverse mortgage out on her apartment and staying put. What are the advantages and disadvantages of that? How does the Centrelink reverse mortgage compare with others on the market? Are there options she hasn’t considered?

Michele is a big fan of super and has been salary sacrificing extra contributions for many years after advice from the pay office at work. “I managed to make contributions without losing cash in hand by shifting into a lower tax bracket,” she says. But then disaster struck when her savings were halved in the GFC in 2008. After nine years, her super has only just reached its pre-GFC level. “If I hadn’t lost it in the GFC, I wouldn’t have to think about selling my home,” says Michele.