Reverse mortgages in Australia
What is a reverse mortgage and is it right for you? Find out here.
Introduction to Reverse Mortgages
We’ve had hundreds of people contacting us wanting to know about reverse mortgages and whether these products might be right for them.
There are pros and cons to a reverse mortgage and you need the right advice to make sure you make the right choice.
The good news is that the brokers we work with are experts when it comes to reverse mortgages and can help you find the right product to meet your needs.
In this article, we’ll be answering questions such as –
- What is a reverse mortgage?
- How does a reverse mortgage work?
- How much can you borrow?
- What are the advantages and disadvantages?
- Are there age limits?
- Where can I find a reverse mortgage calculator
- What are the costs of a reverse mortgage?
- Who are the best lenders & providers?
- Why should I talk to a reverse mortgage expert?
What is a reverse mortgage?
Simply put, a reverse mortgage is a form of home loan that is specifically for pensioners or those who have retired, or are nearing retirement.
It lets people over 60 turn the equity in their home into cash, that they can then use for any worthwhile purpose.
These people are quite often asset rich, but cash poor. A reverse mortgage is also known as a senior’s loan or senior finance and is fast becoming the most popular form of equity release in the country.
How does a reverse mortgage work?
Just like your standard home loan, a reverse mortgage is secured against your property. The amount you can borrow or ‘release’ is usually based on your age and the amount of equity you have in the property.
Interest is charged on the amount you borrow, but unlike other loans, you don’t have to make any repayments. The interest compounds over time and is added to the balance of the loan.
You don’t need to prove income to qualify for a reverse mortgage, but lenders are required by law to lend responsibly, so not everyone will be able to secure this type of finance.
If you’ve been refused a reverse mortgage, talk to one of the expert brokers we work with. They may be able to help you with the right advice.
How much can you borrow?
All lenders are different and have different lending criteria, but generally the older you are, the more you can borrow.
The maximum you would probably be allowed to borrow would be 15-20% of the value of your property, and most lenders allow you add 1% for each year past your 60th birthday.
Essentially this means that if you were 65, then the maximum amount of cash you could borrow would be 20-25% of your home’s value.
You can take the loan as a lump sum, a regular income stream, a line of credit or a combination of any of these. It should be noted that a regular income stream or a line of credit is less costly than a lump sum.
What are the advantages and disadvantages?
There are some significant advantages of reverse mortgages…
- The main one is that you don’t have to make any repayments.
- You only need to repay the loan if you sell your home, move into long term aged care or die.
- You will retain ownership of the property for as long as you wish.
- You have the option of making regular voluntary payments to offset the interest charges.
- Some lenders will allow you to protect a portion of the value of your home, so you will always have some equity for care or to leave as an inheritance.
- In 2012 the government introduced statuary ‘negative equity protection’ which means you cannot end up owing the lender more than the property is worth.
There are a number of disadvantages to consider too…
- Interest rates are usually higher than standard home loans
- Your debt can rise because of the interest compounds over the term of the loan
- Withdrawing equity may affect your pension eligibility
- You may not have enough money for care in your old age
- If you’re the sole owner of the home, then someone living with you may not be able to stay there when you die (married couples are protected).
- Should you fix your interest rate, the fees to change your agreement can be quite high.
- The interest will reduce your equity, which is fine if you have no plans to leave an inheritance to anyone, but it could leave very little in your estate if you do.
If you’re concerned about any of the disadvantages you’ve just read through, first of all don’t panic. There’s a chance many of them won’t even apply to you, and even if they do, the expert advisors we work with can help you safeguard yourself against the risks – make an enquiry to speak to one of them today.
Are there age limits?
The minimum age for a reverse mortgage is 60. Some lenders have a maximum age limit, but a few have no upper limit at all.
Where can I find a reverse mortgage calculator?
There are some online calculators, but because everyone has different circumstances. At best they can only give you a rough idea of what you could expect.
This is where the advisors we work with come in. They are experts when it comes to reverse mortgages and can offer the right advice and find you the best deal.
To arrange a free, a no-obligation chat, make an enquiry with us.
What are the costs of a reverse mortgage?
All lenders are different and each have different interest rates and fees. If you decide to borrow from a provider other than a bank, building society or credit union, they legally restricted not to charge more than 48% interest including all fees and charges.
This is why you should talk to one of the expert brokers we work with who have a working relationship with all lenders. They can offer the right advice and find the best deal. Make an enquiry to find out more.
Who are the best lenders & providers?
There are many reverse mortgage providers in the marketplace, the trick is to find the ones offering the best deals and interest rates.
This is where the brokers we work with come in. They have access to the whole market, not just a few select lenders, so they can find the best deal to suit your needs.
Contact us for a free, no-obligation chat.
Why should I talk to a whole-of-market broker?
Not all brokers are the same. Some have access to just a few lenders, whist others, like the brokers we work with have access to the whole market, and so they can find the best deals for your circumstances, even if you’ve had bad credit in the past.
The brokers we work with have passed a 12 module training programme and are experts in their particular area.
We don’t charge a fee and there’s no obligation, just the right advice every time.
Contact us here today, and then just sit back and let us do all the hard work.