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Reverse Mortgages - Making Your Equity Work For You
If you fall into the category of ‘asset rich, cash poor’, then a reverse mortgage may be the answer to help you tap into your locked-away wealth. But beware the fine print.
With the rise in property prices over the last decade, it’s become more popular to put home equity to use rather than leave it sitting idle. This has contributed to the growth in reverse mortgage products, which allows people to unlock the value in their home by borrowing against its value.
While reverse mortgages are still relatively new to the Australian mortgage market, they’ve become a more popular product among mainstream lenders.
How They Work
A reverse mortgage basically allows you to borrow against the value of your home. You’ll receive either a lump sum or a regular monthly payment. Your obligation to repay the loan kicks in when one of the following happens: you die, sell your home or leave it (to go into aged care, for example). Then, you or your estate has to repay the debt (including interest), usually out of the sale proceeds of your home.
Who’s Eligible?
If you’re 60 or over and own your own home, you should be able to borrow between
15 and 40 per cent of its value. If you’re part of a couple, how much you can borrow will depend on the age of the younger of you. The older you are, the more you’ll be able to borrow.
The Pros and Cons
Reverse mortgages can be great for retirees who have a limited income but have seen the value of their homes skyrocket. It’s also a good way to free up money for urgent expenses or otherwise unaffordable purchases - whether a new holiday, an operation or home improvements.
Bear in mind, however, that a reverse mortgage is still a mortgage - i.e. a loan.
You’ll be paying fees and interests over the loan term. That means the longer
you have the loan, the larger your debt at the end. According to consumer website
www.choice.com.au, at current interest rates it’s likely the amount owed on an
average reverse mortgage will double in less than 10 years. There’s also the risk
of falling into ‘negative equity’: where your loan amount ends up being more
than what your home is worth. You also need to be careful if you’re on a pension,
as the loan may be treated as an asset.
Let us explore your options and find a home loan from one of the following
lenders:
- Adelaide Bank
- AMP
- ANZ
- Australian Central Credit Union
- BankSA / St George
- BankWest
- Citibank
- Commonwealth / Colonial
- GE
- Heritage
- Home Loans Limited
- Homeside
- HomeStart
- IMB
- ING Direct
- LaTrobe
- Liberty
- Owner Builder Finance
- Pepper
- Pioneer
- Plan Lending
- Suncorp
- The Rock
- Westpac
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Did You Know?
As part of our free service we will determine whether a Reverse Mortgage will fit into your lifestyle. If you're over 60 or your someone in your family that would be interested in Reverse Mortgages, then Lending Hand Finance can help.
Contact Lending Hand Finance on
1300 850 545 or
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