Reverse Mortgage — What Is It?
A reverse mortgage is a loan designed particularly for homeowners who are 60 and over. Reverse mortgages enable senior Australian to access the locked away equity they have gained in their home so they can move it towards their financial requirements without having to sell.
Aside from your age, other requirements, terms and conditions for eligibility do apply. How much you can borrow will be based on the value of your house and the age of the youngest borrower.
Compared to other loans, you don’t have to make monthly repayments, however, you can do it voluntarily. The reverse mortgage can instead be paid out at the end of the loan when either the youngest borrower moves from the house or pass away and the house is sold.
We can assist you through all the information that you have to know, including the latest reverse mortgage interest rates, how this type of loan works, and why it may be the right choice for you in your retirement planning.
Safeguard For You and Your Home
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.
Frequently Asked Questions
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 or to move into aged care.
Those who are 60 or over and a property owner in Australia are eligible to apply for 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.
Aside from our fees, there are additional costs associated with taking out a reverse mortgage. ASAG fees are found within our ASAG Fee Schedule which can be requested for your independent review. Other additional costs to keep in mind during your research include the costs for obtaining:
- Legal advice — a legal advisor’s sign-off is required by the lender and this can range in amounts depending on your preferred solicitor.
- Government costs in connection with the lender’s registration of its interest in the property.
As reverse mortgages do not have any required regular repayments, over time, interest compounds as you pay interest on your interest, 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.
Before taking out an ASAG Reverse Mortgage, it is important to consider if it’s the right decision for you. If you do not proceed with an ASAG Reverse Mortgage you will not incur any of the required exit and discharge fees if you decide to change after the loan is active. With an active loan you can of course change your mind and exit the loan and/or sell your house at any time.
No, you won’t lose your home with a reverse mortgage as you remain the owner of the property until you decide to sell.
A reverse mortgage can be a vital tool in your long-term retirement strategy that can help improve your income and lifestyle when used properly.
A review by ASIC found that reverse mortgages could help retirees to reduce financial stress and fund a more comfortable retirement. There may be higher demand for these products in the future with more releases in the Australian market as the population ages.
Accessing some capital now will reduce the amount of your home equity available for any beneficiaries of your estate. However, a planned approach that also includes professional consultation by a financial advisor and discussions with family will assist you in the planning process to ensure that you have enough for any desired inheritances and aged care at a later time.
Reverse mortgages are government regulated, comply with vulnerable client protection, and subject to stringent lending criteria. All applicants will be assessed if they have sufficient equity in their home, meet lending criteria and are entering into the loan knowledgeable and fully prepared. They must also be able to maintain their property and keep it insured throughout the loan term. Independent legal advice may also be required.
A reverse mortgage isn’t a choice for everyone and there is still the consideration to downsize. There’s likely to be a financial cost to sell a house, with an emotional attachment as most retirees wish to age in place. Selling your home may also have an effect on the amount of pension you’re eligible to receive from then on. In any decision process, it’s important that you consider all options and if applicable to you, contact Centrelink to discuss your future entitlements.
Terms and conditions apply, and you are required to meet your responsibilities under the contract.
For more details, download our free Product Guide, or call us on 1300 002 724 to see how using ASAG Reverse Mortgage could improve your retirement income so you can Live The Life You’ve Earned.