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What are Reverse Mortgages?

(Also known as Lifetime Mortgages and Equity Release Mortgages)

Reverse Mortgages have been created for seniors who own a property yet have little or no money (savings/cash), and are therefore considered asset rich and cash poor.

This will become an increasingly challenging issue as the population ages and seniors who find themselves in this position will have several options to consider.

These could include:

Reverse Mortgages are becoming increasingly popular and allow seniors to use the money for any worthwhile cause.

So how do Reverse Mortgages work?

A Reverse Mortgage is a loan secured on your home or investment property and provides a source of funds by releasing some of the equity tied up in the property. Funds released by the loan can be taken as a single lump sum, as a series of installments, or drawn down as and when required.

Unlike a traditional mortgage, no repayments are made while you are living in your family home, rather they are made when you permanently vacate the property. This is likely to be when all borrowers have passed away, moved into long-term aged care, or when the property has been sold. At this point the lender will seek all moneys owed to them.

The moneys owed will equal all of the loan advances, including money used to finance the loan costs and money used to pay off any prior debt, plus the interest that is added to your loan balance. Interest rates can be fixed for the life of the loan.

Accessing a Reverse Mortgage rarely has a negative affect on your pension; rather it will add to the payments that you already receive.

How much money can I access with a Reverse Mortgage?

The amount of money you can borrow is calculated on your age (minimum 60 years of age) and the value of your home. Usually, the older you are, the greater amount advanced to you. Fund advances are likely to be between 11% and 45% of the value of your property. You will not be required to produce any bank statements or proof of income.

Reverse Mortgage loans are intended to allow some residual value in the property at the termination of the loan. However, this is not always the case. It depends upon the amount you borrowed and the growth in value of your home. While historical data and trends indicate that your property value is likely to continually increase for the life of your loan, this is not a certainty. Nor are you likely to be able to predict how long you will live in your home. However, as previously mentioned, the lender will only be requiring payment of the loan once the borrowers have permanently vacated the property.

If the amount owed to the lender is less than the value of the property, then you or your estate keep the remaining balance.

However, if the amount owed to the lender is equal to or more than the value of the property, then your total debt is limited by the value of your home. In other words, you can never owe more than what your home is worth at the time the loan is repaid. This cap on the loan balance is known as a "non-recouse" limit. It means that the lender does not have legal recourse to anything other than the value of your home. Neither you, your estate, nor your beneficiaries will be asked to pay any difference - now that's peace of mind.

Why don't you fill out the easy Online Enquiry Form and see how much equity you can access for your retirement?