What Is A Reverse Mortgage?
It's As Easy As 1, 2, 3!
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%. For more info, download our free 'What is a reverse mortgage?' guide, try our equity calculator or call us on 1300 760 139 to see how using your Household Capital could improve your retirement income so you can stay safe and Live Well At Home™.
What are the benefits of a reverse mortgage?
The key benefit of a reverse mortgage is to improve your long-term retirement funding. This, in turn, enables you to:
- Access capital or income - or both
- Establish a contingency fund
- Improve your retirement lifestyle
- Remain living in your own home
- Look forward with confidence
Who is eligible for a reverse mortgage?
Eligibility criteria for a reverse mortgage is as follows:
- The youngest borrower must be age 60+
- Australian homeowner
- The minimum property value of $600,000
- Property must be in an eligible postcode
- Primary residences, holiday homes and investment properties are available for security.
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 the best place to live and the right way to fund your retirement.
How can I use a reverse mortgage?
Wondering how to use the equity in your home? Our customers have approached us with a diverse range of needs. These include:
- Setting up a regular fortnightly or monthly 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.
How do I repay a reverse mortgage?
Your reverse mortgage loan is generally repaid from the future sale of your home. This may occur if you downsize later in retirement or move into residential aged care. Alternatively, the loan will be paid from the proceeds of your estate. Of course, you can repay the loan at any time 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.
How do reverse mortgages differ from home equity loans or lines of credit?
Several 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 Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. 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 diminish your retirement income. As interest rates increase, so will these regular repayments. Each month, you may 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 of 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.
Can you lose your home with a reverse mortgage?
The short answer is no. Reverse mortgages in Australia are governed by the National Consumer Protection Act 2009.
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.
How long do I have to repay the reverse mortgage?
A reverse mortgage does not have to repaid until you sell your home, in which case it is paid as part of the settlement process. If you remain in your home until you pass away, your estate has 12 months in which to pay out the loan.
How old do I have to be to take out a Reverse Mortgage?
The youngest borrower has to be aged 60+.