Reverse Mortgages to Release Equity from your Home
Release equity from your home with a Reverse Mortgage a seniors financing option
What is A Reverse Mortgage
A reverse mortgage is a loan made on the equity holding in your home when you reach 60 years of age. There is no requirement to repay the loan until you die, sell the property or move into a retirement village.
It this way, in reality, a reverse mortgage is the opposite to the taking out of a loan in the traditional sense. Instead of the loan amount becoming smaller as the loan is repaid a reverse mortgage debt grows as the interest on the debt builds. This is because no repayments are made and the interest accumulates. In fact the debt actually doubles in ten years.
Featured Reverse Mortgage Loans
| Home Loan | Details | Interest Rate (p.a.) | Comp Rate^ (p.a.) | App Fee / Ongoing Fee | Max LVR | Min & Max Borrowing | |
|---|---|---|---|---|---|---|---|
 Bankwest Seniors Equity Release Home Loan |
No application fee for a limited time only. | 7.83% | 7.87% | $700 / $ 0 | 25% | $20,000 / $2,500,000 |
 
|
 Commonwealth Bank Equity Unlock |
Receive the funds in one lump sum or draw down as required. | 8.16% | 8.26% | $950 / $12 | 45% | $20,000 / $425,000 |
|
 St.George Seniors Access Home Loan |
Lump sum or periodic withdrawals and no negative equity guarantee. | 8.80% | 8.86% | / $15 | 25% | $10,000 / $250,000 |
|
Advantages of a Reverse Mortgage
The advantages of taking out a reverse mortgage can include the following:
- No regular repayments. Because the loan doesn’t have to be repaid until the borrower either dies, sells the home or moves into a retirement home, there are nor regular repayments to be made. This suits a retiree because of his or her reduced income following retirement.
- No need to sell up to access your asset. Many people on reaching retirement are asset rich (because the home has been paid off) but cash poor because of the diminished income following retirement. The taking out of a reverse mortgage can return some of that asset as cash to enjoy whilst still living in your own home. It removes the necessity to sell up in order to be able gain access to your money that is otherwise tied up in your bricks and mortar. In this way you can remain in the home you know living among friends and neighbours who you love and trust.
Disadvantages of a reverse mortgage
Before you go ahead and enter into a reverse mortgage to gain the advantages it can obviously offer, you must also weigh up the disadvantages. Without doing so you may enter into a situation that you will finish up having no control over. Some of these real disadvantages are included among the following points:
- When the time arrives for you to move into a retirement home you may not be able to do so because the interest owing on the loan will have eaten into the balance of the equity you had in the property.
- The value of your estate may diminish and you may not have anything to leave your beneficiaries.
- If you take out the loan in a lump sum it may affect your Centrelink pension payments and entitlements.
- If you are joint owners in your home with your spouse or partner the reverse mortgage will have been taken out in both names but if the home is in one partners name only and that person dies first, or moves into residential care, the remaining partner may find him or herself homeless.
The fine print about Reverse Mortgages
All people contemplating taking out a reverse mortgage in order to enhance their lifestyle in their latter years should also closely study the fine print on any contract before signing. It would also be good advice to have it done on your behalf by a solicitor who you trust. Some such items to keep in mind can include the following:
- Study the default clauses. Some contracts will have the borrower in default for quite minor contract breaches and such a breach can legally have the lender demand immediate repayment of the whole loan or increase the interest rate. Failure to be able to meet these demands may mean that your house will be sold up from under you.
- Make certain that you have a ‘No Negative Equity Guarantee’ clause included in your contract. This guarantee will ensure that if any shortfall occurs upon the sale of your house (when the loan balance exceeds that of the value of the property) your estate will not have to pay the difference.
There can be many advantages in taking out a reverse mortgage late in life but if you do so too early the accruing interest can become a serious problem. Look into it thoroughly and make sure you fully understand all the implications.
What to Look for in a Reverse Mortgage
When people get older and stop working or lose their jobs then they may find it difficult to pay off their mortgage. And while selling the house to pay the mortgage may seem like a good idea it leaves the person with no assets and in need of a place to live. A reverse mortgage is a way for people to pay off their mortgage for a short period of time. This article will explain what a reverse mortgage is and how they are used. Furthermore, this article will explain what to look out for in reverse mortgages.
Reverse mortgages are a way for people with few funds to meet their mortgage repayment responsibilities. This section of the article will explain what they are and who they are suited to:
- Reverse mortgages. Reverse mortgages are loans that allow people to draw on the equity of their home to make the repayments. The money from the equity will cover the repayments until the loan is repaid in full, the owner dies or the house is sold.
- Who are they suited to. These types of loans are generally suited to people who are retiring and have already repaid their mortgage.
Drawing on the Loan
There are a few ways in which the loan can be paid out. This section of the article will explain how the loan is paid and what to look out for:
- How you draw on the loan. The loan can either be drawn in one lump sum payment or in increments over a period of time. You do not have to pay anything else onto the loan if you do not want to. The lender will then pay off the loan when a death occurs or you move out of the home.
- What to watch out for. If the house does not pay the debts then the lender may ask the beneficiaries to pay off the loan in full.
Non- Recourse Loan
One of the dangers of this type of loan is that you will not be able to pay off the loan with the sale of your house. This section will explain how you can avoid this:
- The danger or negative equity. If the house values fall dramatically you may end up owing more than the house is worth. This is called negative equity. This means that your beneficiaries will then be left with the debt and you may have to move out of the home.
- Solution. If you take out a non-recourse loan you will have a guarantee that if you develop negative equity then you will not have to leave your home.
Find a Reverse Mortgage with eChoice
Compare 100s of home loan products from over 30 different lenders with eChoice.
- Interest Rate of 6.55%
- Comparison Rate of 6.55%
- Application Fee of $0
- Maximum LVR With LMI: 90%
- Minimum Borrowing: $0
- Maximum Borrowing: $0
Industry Standards
Most providers in Australia will offer a reverse mortgage. As the loans are very controversial there are many standards that must be met with these loans. There is now a voluntary body that oversees these types of loans to ensure that all people understand what they are signing up to and that they realise what will be required of them and their beneficiaries.
What are Reverse Mortgages
The reverse mortgage home loans are loans that will help people in a specific situation. This section of the article will explain what the reverse mortgage home loans are and who they are suited to:
- Reverse mortgage. A reverse mortgage is a mortgage that will take money from your home. If you have been paying off a home for a while and have enough equity you can get a reverse mortgage. The reverse mortgage will borrow money against the equity in your home and make the repayments on your loan using this money.
- Who are they suited to. The reverse mortgage loans are used as a last resort for money. They are suited to people that need money but are unable to make their repayments on their home loan.
When may you have to get a Reverse Mortgage
You will generally only need a reverse mortgage in a few situations. This section of the article will explain when you will need a reverse mortgage:
- If you are retiring. If you are retiring but are still paying off your home loan then you will use a reverse mortgage to make the repayments on the home loan. This will free up the money you have for other day to day costs.
- If you need money. The reverse mortgage can also be sued for short periods of times to free up money for a variety of purchases.
What Happens at the End of a Reverse Mortgage.
Because the reverse mortgage takes money from your home it is interesting to see what happens at the end of a reverse mortgage. This section of the article will explain what happens at the end of a reverse mortgage:
- Home is used to pay off debt. The reverse mortgage will draw money from your home when you retire. At the end of the reverse mortgage you will then have to pay off the loan. This will usually happen with the sale of your house. By selling the house the original loan will be covered and the reverse mortgage will be paid.
- What happens if the debt isn’t paid. One of the dangers of the reverse mortgages is that you will borrow more money than your house is worth. For example if the reverse mortgage is taken out at a time of high property values and paid off during a time of low property values then you may still own money. If you have passed on then your family may have to pay the debt.
Reverse mortgages are a way for people to keep their house when they retire. By drawing from the equity in the house to make the loan repayments you can stay in the house as long as the equity can cover the cost of the repayments. While this is handy, if the sale of the house does not cover the loans then you or your family may be left with unpaid debt.
Related Posts
- Reverse Mortgages Can Help You Fund Retirement
Reverse mortgages are a great way to fund your retirement. A reverse mortgage allows you to take the money from a regular mortgage but get cash instead. Find out how reverse mortgages can help you save up for your retirement. - Is Equity Release Safe?
If you would like to apply for an equity release loan then you should be sure to read this article and find out whether the equity release is safe. - What is Home Loan Equity Release?
If you are considering applying for a equity release loan then you should read this article and find out whether other options may help you more. - Reverse Mortgages for Seniors
The reverse mortgage loans are a great way for seniors to free up money. Read this article and find out more about the reverse mortgage loans. - Spending the kids' inheritance: right or wrong?
- Tips on Arranging Aged Care Facilities for Your Parents
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