Reverse mortgages are available for people over 60 years old who are asset rich and income poor. They allow property owners to convert some of their equity into cash. Funds are accessed in different ways, or combining the following;
How to receive your cash
1. Lump sum-taken at settlement or a future date.
2. Regular payments-used to top up income on a regular basis
3. Cash reserve/line of credit-allows a property owner to access lump sums as required in the future. Interest accumulates as funds are drawn.
The amount available with a reverse mortgage depends on the value and location of the property securing the loan and the age of the youngest borrower. You can use your home or investment property.
As the name implies reverse mortgages operate in the opposite way to a standard home loan. There are no monthly repayments, or borrowing capacity assessment when applying for a reverse mortgage. It’s a simple calculation based on the property value and age of the youngest borrower. Interest is charged monthly and added to the loan. It’s repayable when the youngest borrower leaves the home permanently. This could be moving into aged care, or selling the home and moving elsewhere.
Reverse mortgages have a no negative equity guarantee. When the property is sold the lender only has access to the value of the property to repay the loan, not any other assets of the estate.
The main reasons people use a reverse mortgage;
1. Paying off an existing mortgage once they retire to lessen the strain on their cash flow given their incomes have reduced significantly.
2. Home renovations
3. Managing normal household expenses
4. Purchasing larger items such as a new car or going on a holiday, or any other worthwhile purpose.
Reverse mortgage loans are flexible and if managed properly help reduce the amount of stress and anxiety older people feel trying to manage on their reduced income.
If you or someone you know would like more personalised information, please Contact Us .
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