Currently, 89% of Australians aged 65 and over own their own home. While selling the property is one option to release funds if you’re finding it difficult to make ends meet, some lenders now offer a reverse mortgage* that could help you access your home equity without having to move.
What is a reverse mortgage?
A reverse mortgage is like a normal home loan that has been designed for the needs of seniors. It allows people aged 60 and over to release home equity to live a better retirement. No regular repayments are required (though voluntary repayments can be made at any time), the interest is added monthly to your loan account and the debt then repaid from the future sale of the property. Importantly, you continue to 100% own your own home.
What can you use a reverse mortgage for?
You can use the funds for any worthwhile purpose, including home repairs or improvements, travel, a new car, debt consolidation, medical costs, aged care, living expenses or anything that can make life easier in retirement. You also continue to remain the owner of your home, stay there for as long as you choose, and continue to receive any increases in home value.
How does it work?
Reverse mortgage loans are very flexible. The loan proceeds can be received as a lump sum, an income stream, or a cash reserve (like a ‘line of credit’), so you have flexible options depending on your preferences and needs. For example, if you borrow $50,000 but only use $1,000 per month, you will only pay interest on what you draw down. You are also able to repay some reverse mortgages partially, or in full, at any time without paying additional penalty charges**, adding further flexibility.
Is there a limit to what I can borrow?
The amount you can borrow is determined by your age, the value of your property and other requirements of the provider. At 60, you may be able borrow up to 15% of your property value, and this may be able to increase by 1% every year until 90 when it’s possible to access 45%. Applications are subject to the lender’s loan approval criteria, including a property valuation.
*Applications for a reverse mortgage will be subject to lender loan approval criteria. Full Terms and Conditions will be included in an loan offer. Fees and charges are payable & some postcodes may be excluded
** This only applies to a Reverse Mortgage product with no break fees
Reverse mortgages are arguably the most heavily regulated consumer finance product in Australia. As a result, reverse mortgages have considerable protection for customers, including a guarantee that you will never owe more than the net sale proceeds of the property (this means a No Negative Equity Guarantee regardless of market trends), guaranteed lifetime occupancy and no requirement to make repayments until the end of the loan (with flexibility to repay in full or in part at any time). This protection, which is subject to you adhering to the terms of the loan, and the thorough application process helps provide peace of mind. There is no chance of the family being left with debt to pay no matter what happens to the property.
NB It is sensible to get independent advice, and legal advice is compulsory when taking out this type of loan.
I am pleased to advise that I am accredited with Heartland Seniors Finance, a lender backed by Bank NZ, who has a nationally available reverse mortgage product. If you would like to know more about this product, please do not hesitate to contact me to discuss further on 0412 709 200 or book a time to chat with me via calendly.com/louise