Reverse Mortgages

A reverse mortgage is a home loan for people who are aged over 65, (some banks or lenders may offer reserve mortgages to people aged over 60) that may be asset rich but cash poor. These people may have all their wealth in the property they own, and maybe struggling to live the lifestyle they thought they might have, in retirement.

With this type of mortgage, the bank or lender will lend against the property, and you are not required to may any repayments. The interest on the loan capitalizes, which means the loan gets bigger, as you are not required to make any repayments. With some of the banks and lenders that offer reserve mortgages, you can make repayments, if you choose too, so it is important to seek some information from a qualified mortgage broker, so you can make an informed decision on what is best for you.

A reverse mortgage can be ideal if you are seeking to utilize the equity in your home for any worth while purpose, including, holidays, car, cash in the bank etc. The loan is required to be paid out, when you sell the home, move into a retirement village or pass away. If there are two partners, generally speaking the home wont be sold, if something happens to your spouse and you are still living in the property.

Most banks and lenders in Australia offer a 'No Negative Equity Guarantee'. That basically means that if the property is sold, and the loan balance is more than what the property is sold for, you or your family are not liable for any outstanding debt, that responsibility is taken on by the lender of the reverse mortgage.

Banks and lenders will limit the loan to the property value at the start of the reverse mortgage to around 25%. With some banks or lenders, the older you are, the maximum loan to the value property may increase. It is important to speak to a qualified mortgage broker to discuss your particular options. It is also advisable to speak to your family, to discuss your needs. With a reverse mortgage, you will also be required to get independent legal advice, so you can gain an understanding of your obligations.

Advantages

• May help fund your retirement.
• You may be equity rich and cash poor, thus utilizing the equity in your home to fund your retirement.
• You can stay in your current home, without the need to sell and move into a cheaper home.
• Some banks and lenders still offer fixed rate and variable rate reverse mortgages.

Disadvantages

• The interest on your reserve mortgage can capitalize, which will reduce your equity over time.
• The interest rates are generally higher than standard home loans.
• Your inheritance to your children or beneficiaries may be less, as the reverse mortgage has to be paid out in full.

General Reverse Mortgage Fees

• An application fee may apply.
• Your reverse mortgage may have a monthly fee.
• The bank may re value your property every couple of years, this valuation fee may be added to the loan.
• There may be a mortgage closure fee.

Loan Term And Repayment Types

• The loan is generally only required to be paid out if you move into a retirement home, sell the property or pass away.
• Repayments are not required, although with some banks or lenders, you can make repayments to your reverse mortgage, if you choose too.

If you would like some more information on Reverse Mortgages, contact Perth Mortgage Broker Group , or call Troy on 0411 229 602, 7 days a week.