We have a Retirement Income Gap!
In Australia, we are living longer than ever before. Unfortunately, not everyone has enough savings to fund their retirement lifestyle, and many Australian are unable to enjoy the retirement they richly deserve. But DOWNSIZING the family home, or relying on expensive Credit Cards are not the only options available to everyday Aussie homeowners!
Enter the Specialist Loan Option called a REVERSE MORTGAGE - that enable Aussie Home-owning Seniors to supplementarily fund their retirement lifestyle.
Understanding Reverse Mortgages - how can they benefit you?
A reverse mortgage is just like a normal home loan, except that it has been designed to meet the needs of seniors. It allows people aged 60 and over to release equity in their home to fund a more comfortable and independent retirement - WITHOUT the need to sell your home! You just continue to own and live in your own home - yet get the benefit of the equity in your home to fund a better lifestyle.
No regular repayments are required, though voluntary repayments can be made at any time. Interest is added monthly to the loan, which is repaid from the future sale of the property. Importantly, you continue to 100% own your own home.
How can you use it?
Funds can be used for any worthwhile purpose.
Many Australians who retire just desire a few of life’s ‘wants’ and "pleasures"; to travel, to enjoy outings with friends and family, or to occasionally spoil the grandkids.
A common reason for taking out a reverse mortgage is to consolidate debts, and other popular uses include taking the stress out of everyday bills, home repairs and/or improvements, paying for medical procedures, car maintenance, or anything that can make your life easier or more comfortable in retirement.
Is there a limit to what I can borrow?
The amount you can borrow is determined by your age, the value of your property and other requirements of the provider. At 60, you may be able borrow up to 15% of your property value, and this may be able to increase by 1% every year until age 90 - when it’s possible to access 45% of your home's value.
ALL applications are subject to the lender’s loan approval criteria, including a property valuation.
A reverse mortgage is very flexible and you can choose how to take the funds; either as a lump sum, cash reserve, or a regular advance (which can be paid monthly, quarterly or annually over 5 or 10 years) - or a combination of all three.
Reverse mortgages are arguably the most heavily regulated consumer finance product in Australia. As a result, reverse mortgages have considerable protection for customers, including a guarantee that you will never owe more than the net sale proceeds of the property, guaranteed lifetime occupancy and no requirement to make repayments until the end of the loan (with flexibility to repay in full or in part at any time). This protection, which is subject to you adhering to the terms of the loan, and the thorough application process helps provide peace of mind.
How do I decide on a provider?
One of the most important decisions you’ll make about a reverse mortgage loan is which lender to choose. This decision may have a long term impact on you and your family, so it’s crucial you get this right.
Criteria to consider include the flexibility of the product being offered, ongoing fees and charges, protections offered to customers, and what loan options are available.
It is also sensible to get independent financial advice from a suitably qualified advisor to help answer the many questions you may have and/or the impact that any loan may have on your government entitlements. All Applicants MUST get independent legal advice - as this step is compulsory when taking out a senior's loan product.
Some Important Considerations
1. Could a Reverse Mortgage effect my pension?
You can usually access some of the equity in your own home without impacting government entitlements. HOWEVER, you should contact a suitably qualified and licenced financial advisor who is experienced with retirement and centrelink issues or contact centrelink direct and arrange an appointment with a Centrelink financial informations services officer, who can help you:
2. What COSTS are involved?
Loan Interest is COMPOUNDING, which means the loan balance is increasing over time as interest is added to the loan. Payments are not necessary, but if you do make payments these will help offset the effects of the compounding interest charges!
Applications for a reverse mortgage will be subject to your chosen lender's loan approval process and criteria. Full terms and conditions will be included in any loan offer made by them to you. There are Fees and Charges are payable By You for setting this up, including your independent legal advice that you must obtain to fully explain to you the ramifications of this highly regulated consumer loan product.
3. When is the Loan Due and Payable?
At the end of the term of your loan (when you move permanently away from your home) the total loan will then be payable. This is usually from the sale of your property, passing away, or moving to aged care.
4. Australian Law Guarantees a NO NEGATIVE EQUITY Dilemma
Australian Reverse Mortgages have a No Negative Equity Guarantee enshrined in the legislation. Subject to your compliance with the loan conditions, your loan will never exceed the net sale proceeds of your home!
We are here to help you make the Best Decision Possible.
If you would like to talk to us about how a Reverse Mortgage may help you, please do not hesitate to contact us - It Is FREE to inquire and Book an Appointment with a Credit Advisor.
GET INFORMED - TO MAKE BETTER DECISIONS ABOUT YOUR FINANCIAL FUTURE
(Part of the EZFinance Group)
EZFinance Pty Ltd (ACN: 140178383 - ACL: 392611) and it's authorized Advisors are fully qualified to give advice and assist with all/any consumer lending. EZFinance Pty Ltd is a member of AFCA
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