What Is A Reverse Mortgage?
Most Australians dream about retirement and having more time with family and doing the things they love. But for some, this dream becomes a nightmare. The cost of living keeps going up, superannuation balances diminish, and the Age Pension doesn't adequately provide for a comfortable retirement. Australian retired homeowners have the opportunity to tap the savings they've accumulated in their home using a reverse mortgage. It's an equity release product. The purpose of taking out a reverse mortgage is to access the savings in your home without needing to sell it.
How Much Home Equity Can You Borrow?
Whether you need income, capital, or a mix of the two, try our easy to use calculators to see how you could transform your retirement with a Household Loan.
Valuable Protections For You and Your Home
Guaranteed lifetime occupancy
Means you can’t be forced to sell or move.
Remain the owner of your home
Continue to benefit from any increase in property value.
No regular repayments required
Loan is repayable when you leave your home, or repaid at anytime without penalty.
No negative equity guarantee
You cannot end up owing more than your home is worth, regardless of its value.
Frequently Asked Questions
How does a reverse mortgage work?
A reverse mortgage allows you to access the equity in your home through a loan facility that doesn't require repayment until you vacate the property./
The amount you can borrow is a function of your age and the value of your home. The older you are, the more you can borrow. The Loan to Value ratio - or LVR - increases by 1% for each year older than 60.
As a guide, if you're aged 60, the maximum amount you can borrow is 15% of the value of your home and if you're aged 75, the maximum amount you could borrow would be 30%.
Why take out a reverse mortgage?
The purpose of taking out a reverse mortgage loan is to improve your long term retirement funding; it enables you to access the savings in your home without needing to sell it. That way, your home can be both the best place to live and the right way to fund your retirement.
What are the benefits of a reverse mortgage?
The key benefit a reverse mortgage is to improve your long term retirement funding. This, in turn, enables you to:
- Increase your retirement income
- Improve your retirement lifestyle
- Remain living in your own home
- Look forward with confidence
Most importantly, a reverse mortgage allows you to enjoy the retirement you’ve worked hard for.
How can I use a reverse mortgage?
Our customers have approached us with a diverse range of needs. These include:
- Setting up a regular income facility
- Refinancing an existing mortgage
- Renovating or modifying their home to ensure it’s retirement ready
- Covering an unexpected medical expense
- Buying a new car
- Helping children or grandchildren buy their first home
- Funding in-home care expenses
- Funding the transition to residential aged care.
We find many of our customers simply like the security that comes from having a contingency fund for those unexpected expenses that can crop up from time to time.
How do I repay a reverse mortgage?
Your loan is generally repaid from the future sale of your home. This may occur if you downsize later in retirement or you move into residential aged care. Alternatively, the loan will be paid from the proceeds of your estate.
Of course, if you are able to repay the loan earlier, you can do so without penalty.
Are reverse mortgages well regulated?
Reverse mortgages are governed by the National Consumer Credit Protection Act 2009; these protections apply to our Household Loan as well as other reverse mortgage products.
1] You remain the owner of your home and the title remains in your name. This gives you 100% exposure to any growth (or loss) in the value of your property, into the future.
2] You have guaranteed lifetime occupancy. You cannot be removed from your home by the lender, nor be forced to sell your home at any time against your will, as long as you have met your obligations under the loan, as specified in the terms and conditions of the loan contract.
You do have a responsibility to remain living in your home, to ensure the council rates are paid, to keep it insured and to keep your home well maintained.
3] You cannot end up owing us more than the house is worth. The “no negative equity guarantee” (NNEG) clause, introduced in 2012, means you are protected by law and cannot owe more than your home is worth, irrespective of the value of the property.https://youtu.be/ALWkXRuVmBM
How is a reverse mortgage different from a home equity loan or a line of credit?
A number of banks provide lines of credit or home equity loans that allow homeowners to access the wealth built up in their property.
However, getting credit from the banks has become tougher for retirees since the 2018 Royal Commission into the banking sector. Any form of credit has become less available to retirees who may not have the income to demonstrate they can meet the required repayments.
The regular repayments needed to service a home equity loan or line of credit are likely to reduce your cash flow and therefore your retirement income. Each month, you have to find the funds to satisfy the bank. Many retired Australians tell us they feel insecure knowing their home is subject to repossession in the event being unable to meet repayments.
With a reverse mortgage, you don’t need to make regular repayments, although you can choose to do so. And whatever choice you make, you have guaranteed lifetime occupancy – you can stay in your home for as long as you choose.
How You Can Use A Reverse Mortgage
Customer Stories: The Self-Funded Retiree
Helen lives in an apartment in Mosman, NSW. Now in her mid-70s, she had a long career in the NSW public service and, by her own admission, attained reasonable seniority and accumulated a substantial superannuation nestegg.
As well as her Mosman apartment, Helen owns an investment property on Lake Macquarie. While tenanted, the rental income from the investment property only just covers its costs. However, she does not want to sell either her apartment or the investment property, as she considers them to be an ‘inheritance’ for her two adult sons.
As is the case for many retirees, the value of her super fund was significantly impaired during the current financial crisis. Helen is financially savvy and believes it is better to leave her super alone as much as possible until the market picks up.
With rental income only just covering the costs of her rental property and minimal income from super, in Helen’s words, “keeping on top of the bills is the challenging part.”
She is very proud of the assets she has accumulated and does not wish to sell them, particularly in a poor market.
Household Capital has enabled Helen to fund her retirement during this period. Using a Household Loan - a type of reverse mortgage - Helen has taken a $50,000 sum for contingencies and is drawing a monthly income of $2,500 until she feels her superannuation has recovered sufficiently to draw upon.
Note: customer names and images have been changed to protect their privacy.
What our customers are saying.
Its As Easy As 1, 2, 3!
Use our simple online calculators to check your eligibility and see how much Household Capital you can access.
Explore your retirement funding needs during an online meeting with one of our retirement specialists. Personal, one-on-one service is important to us.
Complete the application process, secure in the knowledge that there’s always someone available to help along the way.