Reverse Mortgage Loans work in the opposite way to a home loan, where you make repayments to reduce the amount owed. With this type of loan interest is added and normally no repayments are necessary until the borrowers permanently choose to leave the home, or until all borrowers pass away. (If however you prefer to make repayments the option is always there).

Note:
The debt still needs to be repaid at some stage, however, this normally only becomes necessary when the earliest of the following occurs:

• You sell your home
• You both permanently vacate your home or move into long-term aged care
• You have both passed away

The ownership of the home stays with you or your estate and you are therefore entitled to any capital appreciation over and above the amount owed.

If you are concerned about the affect of fluctuating interest rates over the time of the loan then a fixed rate loan may give you more peace of mind.

As each Reverse Mortgage loan available will vary in conditions and rates, you should look carefully at a range of loans to find the one that best suits your needs.  

The amount available to you will depend on your age. This generally varies between 10% – 45% of the value of your home. If you have a mortgage on your home then it would have to be totally paid out from the funds available. 

Your Reverse Mortgage Loan may stipulate that your home be insured and kept well maintained. The lender may also request periodic valuations. 

Who are SEQUAL? 

SEQUAL is a voluntary organization that has set a high standard of behaviour for its members when dealing with Reverse mortgage loans.

Their members must adhere to two key standards:

• The borrowers must get legal advice separate to the sales process.
  
• There is a No Negative Equity Guarantee. This means; that provided the terms of the loan have been met, you will never owe more than the value of your home and you can stay in your home for as long as you choose.  You or your estate will not be asked to make up any difference if the loan balance is greater than the sale proceeds.

We have members of Sequal on our panel of lenders. 

You may choose to receive the funds in a lump sum, in regular payments or a combination of both. The interest charged is always only on the amount outstanding. The family home is normally exempt from Tax and any large payment received and spent within ninety days should not affect you, however if you are on a pension and choose to receive payments to supplement your income you should contact Centrelink to clarify any affect this may have on the benefits you are receiving. 

We are becoming much more accepting of Reverse Mortgage Loans as we search for a way to enjoy a comfortable standard of living and still have something to leave our children. Most of whom, when surveyed, were in favour of their parents taking out this type of loan. 

 

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