Reverse Mortgages

Reverse Mortgages are provided by at least 8 lenders in Australia, some also offering Aged Care finance options. These products make possible a more comfortable retirement than can be afforded on the age pension alone and provide a buffer for unanticipated expenditure. The loan can be taken as a lump sum, an income stream, a line of credit or a combination of these.  Like traditional mortgages, interest is charged to the loan account each month but payment of the loan is deferred until the property is sold, the borrowers no longer live in the home or when all borrowers pass away.

For those retirees who stop working before they have extinguished housing debt, releasing home equity could make the difference between being able to stay in the home or, having to sell it to pay off the mortgage.

All Reverse Mortgages written in Australia today must include a “no negative equity guarantee” . This means a borrower cannot owe the lender more than the home is worth.

Borrowers are also advised to discuss the proposed borrowing arrangements with their family and will also be required to get financial advice before proceeding. And if in receipt of a Centrelink Aged Pension, or intending to receive a pension, advice should first be obtained from a Financial Information Services officer at Centrelink.

It is important to understand the future debt of this type of loan – try the ASIC Reverse Mortgage Calculator.