Reverse Mortgages
What you should know
A reverse mortgage enables you to borrow money using the equity in your home as a form of security. The loan itself can be taken as a lump sum, a regular income stream, a line of credit or a combination of these options.
An income is not required to qualify for a reverse mortgage, though interest is charged like any other loan. The difference is that you don’t have to make repayments while you live in your home – the interest compounds over time and is added to your loan balance.
You remain the owner of your house and can stay in it for as long as you want. You must repay the loan in full (including interest and fees) if you sell your home or die or, in most cases, if you move into aged care.
What are the risks?
- Interest rates for a reverse mortgage are generally higher than an average home loan
- Debt can amount quickly as the interest is compounded and added to the total sum of the loan for the life of the loan
- A loan of this type can effect your eligibility for a pension- you may not have enough personal funds to support yourself with aged care or future needs
How much can I borrow?
You can borrow between 15% – 40% of the value of your home- but this also depends on your age. The older you are, the more you can borrow against your home.
The minimum you can borrow depends on the lender– it can be as low as $10,000. The maximum also depends on the value of the property. Borrowing the maximum now can mean that you will not have access to more money later.
