It does not take into consideration your personal situation and may not be relevant to circumstances. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. We’d be more than happy to help you navigate the challenges and find a suitable reverse mortgage option.ĭisclaimer: The content of this article is general in nature and is presented for informative purposes. So if you’d like to find out more about reverse mortgages, get in touch. What’s needed, added Kell, is someone who you can have a “genuine conversation with” about your possible future needs – “not just a set of tick boxes on a form.”Īnd as you know, getting to understanding who you are and what your goals are is what we do best. In fact, ASIC Deputy Chair Peter Kell said this about them: “Reverse mortgage products can help many Australians achieve a better quality of life in retirement.” Now, that’s not to say reverse mortgages aren’t a viable option to help fund your retirement. In fact, for nearly all of the loan files ASIC reviewed, the borrower’s long term needs or financial objectives were not adequately documented. The crux of their findings is that lenders need to do more when it comes to letting borrowers know how a reverse mortgage can impact their ability to fund their financial needs down the track – needs like being able to afford aged care. Remember how we mentioned ASIC’s findings that borrowers have poor understanding of the risks and costs associated with a reverse mortgage?ĪSIC has just reviewed data on 17,000 reverse mortgages and conducted a bunch of interviews with borrowers and industry stakeholders. The catch: a reverse mortgage is a more expensive form of credit compared to standard home loans the interest rates are typically 2% higher and, as there are no repayments required, interest compounds. The upside: the loan doesn’t need to be repaid until much later, such as when the borrower passes away or vacates the property. The rule of thumb is that you can add about 1% to your borrowing capacity each year thereafter. If you’re aged 60, you can borrow about 15-20% of the value of your home. The older you are, the more you can borrow. The loan can be taken in one big lump sum, a regular income, or a line of credit. Reverse mortgages are a credit product that allow you to borrow using the equity in your home as security. The great news for you is that we can help in both departments. On the other hand, ASIC warned that longer-term challenges exist, with a comprehensive review finding borrowers had a poor understanding of the risks and future costs of their loan. On the one hand, corporate regulator ASIC says reverse mortgages are allowing older Australians to achieve their immediate financial goals and help improve their lifestyles in retirement. Reverse mortgages have popped up in the news this week – both for good and not-so-good reasons. With a reverse mortgage you can unlock nest egg funds without having to sell your whole nest.
1 Comment
4/10/2023 05:37:43 pm
I appreciate you mentioning that a reverse mortgage is a more expensive type of credit than traditional house loans since interest compounds and rates are normally 2% higher. My mother desires to purchase a home. I'll advise her to obtain a reverse mortgage before purchasing a home.
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