With a reverse mortgage you can unlock nest egg funds without having to sell your whole nest. Here’s how we can help in the process.
Reverse mortgages have popped up in the headlines over the years – both for good and not-so-good reasons.
On the one hand, corporate regulator ASIC says reverse mortgages are allowing older Australians to achieve their immediate financial goals and help improve their lifestyles in retirement. That’s the good.
On the other hand, ASIC warned that longer-term challenges exist, with a comprehensive review finding borrowers had a poor understanding of the risks and future costs of their loan. That’s the not-so-good.
The great news for you is that we can help in both departments.
But first, what is a reverse mortgage?
Reverse mortgages are a credit product that allow you to borrow using the equity in your home as security.
The loan can be taken in one big lump sum, a regular income, or a line of credit.
The older you are, the more you can borrow. If you’re aged 60, you can borrow about 15% of the value of your home. The rule of thumb is that you can add about 1% to your borrowing capacity each year thereafter. So if you’re 70, you can borrow 25%.
The upside: the loan doesn’t need to be repaid until much later, such as when the borrower passes away or vacates the property.
The catch: a reverse mortgage is a more expensive form of credit compared to standard home loans; the interest rates are typically 2% higher and, as there are no repayments required, interest compounds.
Remember how we mentioned ASIC’s findings that borrowers have poor understanding of the risks and costs associated with a reverse mortgage?
Well, let’s dissect that a bit.
ASIC has just reviewed data on 17,000 reverse mortgages and conducted a bunch of interviews with borrowers and industry stakeholders.
The crux of their findings is that lenders need to do more when it comes to letting borrowers know how a reverse mortgage can impact their ability to fund their financial needs down the track – needs like being able to afford aged care.
In fact, for nearly all of the loan files ASIC reviewed, the borrower’s long term needs or financial objectives were not adequately documented.
How we can help
Now, that’s not to say reverse mortgages aren’t a viable option to help fund your retirement.
In fact, ASIC Deputy Chair Peter Kell said this about them: “Reverse mortgage products can help many Australians achieve a better quality of life in retirement.”
What’s needed, added Kell, is someone who you can have a “genuine conversation with” about your possible future needs – “not just a set of tick boxes on a form.”
And as you know, getting to understanding who you are and what your goals are is what we do best.
So if you’d like to find out more about reverse mortgages, get in touch. We’d be more than happy to help you navigate the challenges and find a suitable reverse mortgage option.
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