Reverse Mortgages are also known as Senior’s Equity Release loans. These loans create a lot of discussion, both ‘for and against’. If taken out for the right purpose and managed well, they can be of huge benefit to those in their retirement years, who are asset rich but lack the cash resources to maintain a comfortable lifestyle, or purchase new motor vehicles, go on holidays or really any other purpose.
Basically, Reverse Mortgages are a form of home loan with some striking differences:
- No income is required to prove that the loan repayments can be made as no principal repayments are required. Nor is there a requirement to make interest repayments, although payments to the loan can be made if the borrower wishes.
- On 18th September 2012, the Federal Government introduced statutory “negative equity protection” on all new reverse mortgage contracts which means that you cannot end up owing the lender more than your home is worth.
- Withdrawals from the loan can be either by way of a regular payment, similar to a pension payment or by a lump sum.
The Reverse Mortgage Industry is highly regulated to provide as much protection as possible to those Senior citizens wishing to take out such loans.
Always look for a Mortgage Broker who is accredited through SEQUAL, as that will ensure the broker has the necessary knowledge and education to confirm that all compliance matters are adhered to.