Frequently Asked Questions
Your Information Centre on Reverse Mortgage’s
A reverse mortgage is a loan designed particularly for senior homeowners who are in or are considering retirement. This type of loan doesn’t require regular repayments. The customer remains the owner of their home and continues to live in it. The total loan amount is repaid from the sale of the property later on, either to downsize, to move into aged care or if the last borrower passes away.
What is a reverse mortgage?
A reverse mortgage is one of the most popular types of equity release products in Australia. Equity Release is a term that describes a range of products, with reverse mortgages being one. This also includes home reversion products. Both types enable customers to release some of their home equity, but there are differences.
Reverse mortgages allow senior homeowners to borrow funds against their home without having to make regular repayments. They retain ownership of the property and stay for as long as they want to live out their retirement. The loan is paid off from the future property sale, when the customer decides to downsize or move into aged care.
Home reversion products are not loans, they’re part-sale property transactions. Instead of borrowing against their home’s value, the customer agrees to sell a portion of the house to trade for a lump sum advance. They own and live in the property but won’t deal with capitalised interest on the debt.
Yes. With A.S.A.G. Reverse Mortgage, you remain the owner of your home until you decide to sell. It’s an opportunity for you to benefit from any increase in property value.
Will I still own my home?
Reverse mortgages are well regulated by the National Consumer Credit Protection Act 2009; these protections apply to our A.S.A.G. Reverse Mortgage as well as other equity release products.
- You remain the homeowner of your property and can benefit from any growth in the property value in the future.
- A Lifetime Occupancy is guaranteed, so the lender cannot remove you from your home. Also, they cannot force you to sell your home against your will as long as you meet your obligations under the reverse mortgage.
- The “No Negative Equity Guarantee” (NNEG) law was introduced in 2012, so you can be protected and cannot owe more than your home’s value.
What are the protections?
Reverse mortgages in Australia are heavily regulated for the consumer’s protection and safety. When considering your safety under a reverse mortgage, it is important you consult with family and professionals. You will be required to obtain professional legal advice, but you can also consider speaking to a financial professional such as a financial advisor or accountant as well. Here are the A.S.A.G. Reverse Mortgage safeguards for you and your home:
- Lifetime Occupancy — It allows you to own and live in your home for as long as you want.
- Retain Ownership of Your Home — Continue to benefit from property capital growth.
- No Regular Repayments Required — It’s repayable when you leave your home. Although it’s not required, you can make full or partial repayments at any time without penalty.
- No Negative Equity Guarantee — In 2012, the Australian Government introduced The No Negative Equity Guarantee (NNEG), a law that protects reverse mortgage borrowers from owing more than their home’s value, and from being liable if the property is sold for less.
Is a reverse mortgage safe?
Your A.S.A.G. loan amount will be calculated based on your age, the location of your home, as well as the value of your property. It will be designed so that you only access what you need when you need it. If you would like an estimate, you can use our Reverse Mortgage Calculator.
How much can you borrow with a reverse mortgage?
A reverse mortgage has various uses. These include:
- Aged Care
- Bank of Mum and Dad
- Day-to-Day Expenses
- Debt Consolidation
- Home Care (In-Home Support)
- Home Improvements
- Pension Loans Scheme
- Retirement Planning
- Seniors Cruise Finance
- Senior Refinancing
- Travel and Holidays
- Vehicle Finance
We find many borrowers just like to have an emergency fund for those unexpected costs that can pop up at any time.
What can a reverse mortgage be used for?
Taking out a Reverse Mortgage
A pension payment is an important source of income. Before you proceed with a reverse mortgage, you should talk to Centrelink directly as well as considering consultation with an independent financial professional for advice and understanding on this product and any impacts on existing or future pension entitlements. Centrelink is free to talk to and more information can be found online.
Will a reverse mortgage affect my age pension?
Settlement is only required when you permanently move from your home. This is only if you choose to sell your property, move into aged-care or if you pass away. You are free to make voluntary regular or one-off payments, although this is not a mandatory requirement.
How do I settle the loan without having regular repayments?
As reverse mortgages do not have any required regular repayments, over time, interest compounds as you pay interest on your interest, and any fees and charges that are added to the loan. The longer you have the loan, the higher the amount you’ll have to return. For more information, visit our Reverse Mortgage Calculator page.
What does a reverse mortgage cost over time?
About A.S.A.G. Equity Release
Equity release is a broad term used to generally refer to a product that allows a home or property owner to release some of their equity. There are two primary types of products that allow customers to do this. One being a Reverse Mortgage, the other being a Home Reversion.
Home Reversions are designed to allow seniors access to debt-free funding for their retirement. It can also be an alternative to borrowing against your home’s value. You agree to sell a part of your house or a percentage of its future sale proceeds to trade for money, with no capitalising interest as one of its benefits. You remain as the homeowner and live in it with no obligation to sell until you choose to.
What is Equity Release?
An A.S.A.G. Equity Release is a loan that is designed to assist older Australians access finance in their retirement. A.S.A.G. does this through a loan called a Reverse Mortgage.
Many of Australia’s elderly population have their home as the primary source of their wealth. An A.S.A.G. Equity Release is designed to give you access to this wealth and enable you to live the retirement you deserve without selling or moving on from your home.
Your A.S.A.G. Equity Release will be calculated based on your age, the location of your property, as well as the value of your home. It can be designed so that you only access what you need, when you need it. If you would like to receive an obligation-free estimate, you can use our Equity Calculator.
How much can I borrow?
An A.S.A.G. Equity Release allows you access to part of the equity in your home. This can be used in a number of different ways. Many of which assist people achieve their financial dreams as well as have a much more comfortable, stress-free retirement. Many people will use the equity for home improvements, paying off debt, holidays, as well as paying for medical treatment.
What can I use my home equity for?
As part of ASAG’s obligations under regulation, we are required to ensure that you obtain professional legal support to guarantee complete understanding of your obligations under the loan agreement. Notwithstanding this, A.S.A.G. firmly believes that a well-informed decision is the best decision for all of our clients.
Why does A.S.A.G. require independent legal advice?
Once you have completed an initial application, A.S.A.G. will arrange for an independent, Australian Property Institute (API) registered valuer to visit your home at a date and time that is suitable for you to assess its value.
How does A.S.A.G. value my home?
With an A.S.A.G. Equity Release, Australian seniors have a valuable tool at their disposal that can be utilised in their retirement planning. Many of our features can assist seniors that are looking to supplement their retirement income and free up cash flow. Benefits include:
- A better quality of retirement lifestyle via access to funds from your home capital.
- You remain the owner of your home and any future increase in its value
- Living comfortably and confidently now and into the future
- A highly regulated facility that is government regulated
- Access to lifetime occupancy, no negative equity guarantee and no requirement to make loan repayments until the end of the loan.
- Avoiding the costs and disruption associated with property downsizing as an alternative to accessing your existing home capital.
What are the benefits of an A.S.A.G. Equity Release?
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Pension Loans Scheme
Meet these specific requirements to access the Pension Loans Scheme:
- You or your partner is in Age Pension age or over.
- You’re eligible to get a qualifying pension.
- You or your partner owns a property in Australia that can be used as security for the loan.
- You have appropriate and adequate insurance covering the property.
- You are not subject to a personal insolvency agreement or bankruptcy.
You’ll have to agree to the PLS’s terms and conditions to get the loan. Your partner also has to agree about your application for PLS. They have to agree and sign within the application, stating they understand the terms and conditions. You can get a loan even if your assets and income wouldn’t normally allow you to get one of the qualifying pensions.
The loan payments you can get fortnightly under the Pension Loans Scheme will be based on how much pension you receive. Your combined pension and loan cannot be more than 150% of your maximum pension rate.
In the event your pension changes, your loan payments also adjust. This setting prevents the loan payments to go over 150% of your pension rate or the payment rate of your choice.
If you don’t receive a pension, you’re allowed to get a maximum amount of PLS as a loan payment. You can get loan payments until the total loan balance (including costs and interest) reaches the maximum loan amount.
You can also ask Centrelink to stop your loan payments at any time.
You can make repayments at any time, although you don’t have to. Instead, you can wait and pay it in full when the property is sold.
Partial costs of the loan are worked out based on the type and number of properties you used as security. For example, if one property is used as security for the loan, you’ll have 1 set of costs. If 2 properties are used as security, you’ll have 2 sets of costs.
Refinancing an existing home loan via a reverse mortgage frees up your cash flow and improves your long-term retirement funding. You have the option to make regular interest repayments or pay off the loan only when it’s time to sell or leave your home. A.S.A.G. makes sure that consumer protections, such as Lifetime Occupancy and No Negative Equity Guarantee, are part of your Senior Refinancing.
Why should I refinance in retirement?
Your home holds many memories of raising your kids and establishing a family unit. It has also represented you in a community you’ve been part of for so long. It’s understandable that ownership of your home for as long as you live is something to aspire to in retirement.
Downsizing into a smaller place, like a retirement village, can result in radical change and interrupt your life. By using A.S.A.G. Reverse Mortgage, one of the more effective refinancing options for 60 and above, you can refinance an outstanding home loan instead of downsizing.
Consider these key points in refinancing an existing home loan with A.S.A.G. Reverse Mortgage:
1. Flexible repayments
With our reverse mortgage, you don’t have to make repayments regularly as you’re not required to. However, you may repay partially or all of it at any time without penalty.
2. Free up your retirement income
Because you are not required to make regular payments, your income can be redirected to other important purposes.
3. Lifetime Occupancy
An A.S.A.G. Reverse Mortgage can be a responsible and long-term retirement solution. It comes with consumer protections, including lifetime occupancy, which guarantees you age in place.
Reverse mortgages are government-regulated, comply with vulnerable client protections and safety nets, and are subject to stringent lending criteria under the National Consumer Credit Protection Act (NCCPA). All applicants will be properly assessed if they have sufficient equity in their home and that the loan is of benefit to the customer. Further assessments are in place to ensure that they are also able to maintain their property and keep it insured throughout the loan term.
Accessing some capital now will reduce the amount of your home equity. We at A.S.A.G. do recommend that before you take out a loan, you do discuss the decision with your family as it will affect your future estate. Furthermore, you should consider how much equity will be used over the term of your loan. More information about this can be read on our Reverse Mortgage Calculator page.
Drastic financial changes will be inevitable, so it’s important to consult your retirement plan with the experts, such as Centrelink or a financial adviser.
Can you fall into default with an A.S.A.G. Reverse Mortgage?
*DISCLAIMER: Interest is based on a loan of $150,000 with a term of 25 years. Interest is calculated daily and charged monthly.
Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.