In Australia, it’s typical to hear people describe retirees as “asset rich but cash poor”. This simply means they are homeowners but may need a financial injection of some sort for the things or services they want or need. Reverse mortgages can be a solution. It can provide retirees with a secure lump sum or income stream. 

A reverse mortgage works by using the equity in your home. A mortgage is set up against this and the funds are made available to you. The money can be made available as a lump sum (for a holiday or a new car or …), as a regular income stream (paid to your bank account monthly, or as a mix of these. No repayments are required until the last owner passes away or is in a retirement home and you continue to be the owner of your home. You are free to occupy it for as long as you wish. Interest does compound and increases your loan balance. 

When there are joint borrowers, the youngest borrower’s age affects eligibility, and in general, the older you are, the more you can borrow as a percentage of the value of your property. The maximum loan amount, the maximum loan-to-value ratio (LVR), and the minimum borrowing age of 60, all vary depending on the lender. Under the Responsible Lending principles of the National Consumer Credit Protection Act, qualifying applicants can borrow up to specified margins against the value of their home or investment property. 

This product is a bit more complicated than the usual mortgages and lenders charge more than the typical mortgage variable rates. There might be account fees, so always read and understand the loan terms and conditions.

Are you interested to know more about Reverse Mortgages? Download our free “Reverse Mortgage FAQs” here.

If you would like to chat and find out more about Reverse Mortgages, schedule a call with our Reverse Mortgage Specialist who can answer your questions and assist with your needs.