Is a Reverse Mortgage for You?

A reverse mortgage is for those over 60 years of age who require a loan against their home but have retired or are about to retire. The most common form of reverse mortgage is a loan where no repayments are made until the home is sold, or both owners of the home are deceased. Interest is charged against the loan and at the time that the property is sold, the loan is repaid in full, including interest.

There is another form of reverse mortgage where the owners can make interest repayments each month so that the loan amount does not increase.

Why take out a reverse mortgage?

The most common reason is if the owner/s of the home want or need to retire, but still have a mortgage on their home. The balance of the loan is switched to a reverse mortgage lender and no further loan repayments are required. It allows for a person to stay in their home and not have to sell and move to a smaller home or one further away from family and friends.

Another reason is if the owners of the home require renovation work to update the home and/or make the home wheelchair/low mobility compliant so that they can live in their home for many years to come.

Other purposes of a reverse mortgage are to assist with expenses during retirement including holidays, or if a parent wishes to gift money to their children to assist with buying a home.

As a reverse mortgage is an accumulating debt, it is essential that you receive legal advice to understand this accumulation and that you understand the conditions of this. As part of the loan application process there is a mandatory legal advice requirement.

Common Questions

• Will the loan end up being more than the value of my home?
  

There are limitations on the maximum amount that can be borrowed against your home to ensure that this does not happen. The younger you are, the less you can borrow. For example, a 60 year old cannot borrow more than 20% of the current value of their home and a 65 year old cannot borrow more than 25% of the current value.

• Will my children have the debt transferred to them when I pass away?
  

The debt is connected to your home. If your children wish to keep your home, they will be required to pay out the debt within a year of your passing. If the house is sold, there is a similar timeframe required to sell and pay out the loan. A final payout figure will be provided, including the original loan amount plus the accumulated interest. When the house is sold, this debt will be paid out and your beneficiaries will receive the remainder of the sale proceeds .

If you or a family member would like to know more about reverse mortgages, or to arrange a confidential discussion, please call Jennifer Lackersteen on 0414670151 or email me at jennifer@jblhomeloans.com.au