Reverse Mortgages - What are they and who are they for?
What exactly is Reverse Mortgage and how do they work?
If you’re retired or know someone who is retired and wanting to access the equity in their home, you may want to consider a Reverse Mortgage. Aimed at Senior Citizens who meet specific criteria, a Reverse Mortgage can help unlock funds so you can enjoy the Golden Years!
As with all lending products, there are risks and strict criteria that apply and it is important that you are aware of these before taking out a Reverse Mortgage.
To be eligible for a Reverse Mortgage, you must be retired or on a pension, be over the age of 60 and have equity in your home – that is, paid off most of your traditional mortgage. This equity is then “released” in the form of a steady income, a lump sum payment, or a combination of both. Interest is still charged on the amount released but you don't have to make repayments while you live in your home - the interest compounds over time and is added to your loan balance. You remain the owner of your house and can stay in it for as long as you want.
Risks and points to consider before you sign up for a Reverse Mortgage are;
- Interest rates are usually higher than the standard home loan
- The debt can rise fast and the interest compounds over time
- Your pension eligibility may be affected
- You need to consider costs for future aged care
Different lenders have different criteria for meeting the Reverse Mortgage conditions. Ages vary and with some banks, the older you are, the more equity you can borrow or have released. For example, if you are 60 the maximum amount you can borrow is likely to be 15-20% of the value of your home. The Government have strict guidelines in place to ensure the amount of debt is not worth more than the home itself.
If you’ve read this far and are still interested in applying for a Reverse Mortgage, or know someone who may be, Brett at Loan Market Ellenbrook can discuss the advantages and disadvantages in detail with you. Brett can shop around for the best lender to help you access your equity and get you a good interest rate so you can start enjoying the retired life and tick off your Bucket List!
Just remember - A reverse mortgage can be useful to relieve financial pressure or improve your lifestyle. Be aware of the conditions of the loan and the choices available, use a qualified Mortgage Broker to help you make an informed decision.
Give Brett a call today on 0407 249 567 for further guidance.