top 5 considerations before taking out a Reverse Mortgage Loan
01 April 2011
Reverse mortgage loans are growing in popularity in Australia amongst those who are reaching retirement age. Many people find that in later life they are dissatisfied with their financial settlements through their superannuation funds etc and the simple option is to take out a reverse mortgage loan for seniors against their homes.
Reverse mortgages for seniors are sometimes referred to as a lifetime or senior equity loan, and are available to residential property owners only. The applicants must also be over the age of sixty living in their own home.
Oppose to a normal fixed or variable rate home loan, where monthly repayments reduce the debt, reverse mortgages keep climbing. Equity in the home is converted into cash, received either as a lump sum or a monthly annuity. The amount you borrow is normally linked to a small proportion of the overall value of the home. Therefore, no repayments are necessary, interest and fees are added to the debt and the total is taken out of your estate. However, different reverse mortgage lenders have different features.
Like all loans, the reverse mortgage has its pros and cons and a few things should be considered before borrowing against the equity of your home.
Here are Bankwest’s top 5 considerations for Reverse mortgages in Australia:
- Do not borrow too much: When shopping around for a reverse mortgage loan home loan, make sure you look for equity deals that come with a ‘no negative equity’. This will protect you from owing more than the net value of your property. With a Bankwest Seniors Equity Release you can borrow up to 90% of the value of your home.
- Research: It is a good idea to seek impartial advice from a financial adviser. Consider all your options and weigh up why you need to take out a reverse mortgage.
- Discuss: There may be more than just you and your partner involved in a reverse mortgage decision. A perfect example is if you have left the equity of your house to your children in a Will then you may want to let them to know what is happening with their future inheritance.
- Check with Centrelink: Old age pension payments often make up a significant proportion of a retirees’ income. Before taking out a reverse rate mortgage it is essential that you get in touch with Centrelink to see if there are any negative implications to the benefits that you currently receive.
- Don’t fall for up selling: You should not be obligated to purchase any other product or services in order to receive an equity release service. Don’t fall for ‘special’ offers being made on other loans. If a reverse mortgage is what you want, then stick to it.
Check the Bankwest Happier Home Loans guide online for more information on what Bankwest offers regarding reverse mortgages in Australia.