Reverse mortgage; Is it a good idea?
A reverse mortgage can help you access the savings in your home to enhance your lifestyle and wellbeing in retirement, without needing to sell your home.
As with any important decision, there are pros and cons to consider in tandem with your personal circumstances.
Reverse Mortgage Pros
- Allows you to enjoy the comforts of your family home for as long as you wish
- Improves your available retirement funding
- Flexibility to provide income and lump sum payments
- Remain the owner of your home, benefitting from 100% of its capital growth
- No repayments are required, leaving more monthly cash available for meeting lifestyle objectives
- Highly regulated with strong consumer protections governed by National Consumer Credit Protection (NCCP) laws
Reverse Mortgage Cons
- Interest is capitalised, so the loan value will increase over time (unless interest is paid during the course of the loan)
- Reduces the amount of your home equity available as a bequest when you die
- Loan to Value Ratios (LVR) of reverse mortgages are generally lower compared to standard home loans; your age dictates the LVR for a reverse mortgage
- Reverse Mortgages tend to have a slightly higher interest rate than a regular mortgage because loans are generally repaid at the end of the term
- Drawing funds from your property now may reduce what you could potentially access at a later date.
A reverse mortgage is very flexible…you can:
- Make payments at any time, although regular repayments are not required
- Repay the loan at any time without penalty
- Vary* or stop regular repayments, depending on your financial position
- Discharge^ an existing bank mortgage with a reverse mortgage
* An increase in regular repayments needs to be assessed and approved before it can be implemented
^ Dependent on available LVR
Download our free "what is a reverse mortgage" guide to learn more
Applications for credit are subject to eligibility and lending criteria. Fees and charges are payable and terms and conditions apply (available on request). Household Capital Pty Limited is a credit representative (512757) of Mortgage Direct Pty Limited ACN 075 721 434. Australian Credit Licence 391876.
Download Free Guide
You may also like