Reverse mortgages
A reverse mortgage allows you to borrow against the equity in your property to secure extra finances during retirement. It is available to residential property owners who are retired and meet the age criteria of the lender. Approximately 37,500 people currently hold a reverse mortgage. The average value of a reverse mortgage is $60,000.
Uses of reverse mortgages
You can use a reverse mortgage for most purposes. The most common usage of a reverse mortgage, according to a survey by a RBS/Deloitte survey in 2009, is to renovate existing property. Other common uses include payment of:
- Holidays
- Medical expenses
- Renovations
- Home maintenance
- Investments
- New car or motor home to go travelling
- Unexpected emergencies
Secure additional retirement funds with a reverse mortgage
To secure additional funds for retirement with a no negative equity guarantee, either as a lump sum or regular pension-style payment, contact your local Loan Market mortgage broker on the form below or call us at any time on 13 LOAN or direct on +61 2 9249 3739.
How do reverse mortgages work?
Unlike a regular equity home loan, a reverse mortgage does not generally require regular repayments. The loan is repaid either when the borrower sells their home, moves into a retirement home, or passes away. They are usually secured by a mortgage on your principal place of residence, but you may potentially be able use your residential investment property as security.
You may have the choice of receiving the money made available through a reverse mortgage either as a lump sum or regular income stream, or in some cases a combination of the two.
This type of mortgage can have far-reaching effects so it’s also very important to speak to an accountant or financial planner and a solicitor before entering into a reverse mortgage agreement. It is also a good idea to inform your family.
It’s also very important to ensure your reverse mortgage is covered by a No Negative Equity guarantee – that is, the amount you owe on your reverse mortgage will never exceed the value of the property. All reputable lenders will offer this guarantee.
Recent studies show that more than 50 per cent of borrowers who take out a reverse mortgage use the services of a good mortgage broker or financial planner (SEQUAL/Deloitte survey, 2009). This is predominantly due to the tailored reverse mortgage solutions a mortgage broker can provide, as opposed to an ‘off-the-shelf’ option available direct from a lender.
Borrowing capacity for reverse mortgages
Different lenders have different age entry levels for their reverse mortgage products, and the percentage of equity or amount of money you can leverage depends upon your age, usually 15-40 per cent of the value of your property. In the case of two borrowers applying jointly for a reverse mortgage, the percentages are usually worked out using the age of the youngest borrower.
Your complete reverse mortgage assessment
For an assessment on your eligibility for a reverse mortgage and to find the one that is in your best interest, talk to your local mortgage broker and we will return your enquiry within 2 business hours ,or visit not-for-profit watchdog SEQUAL. You can also call us at any time on 13 LOAN or direct on +61 2 9249 3739.
