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Reverse mortgages are a very unique product and are specifically designed for retirees who are looking to maintain their lifestyle.
There are many challenges facing retirees and given that our life expectancy has increased, the potential to live for over 25 years once you've retired is quite common.
In saying that the question is how do you fund your retirement years and maintain your lifestyle and the answer may be as simple as a reverse mortgage.
The reason that reverse mortgage have been introduced is to provide an option for those people who may not have the investments in place to ensure an ongoing income stream.
Even if these investments are in place the income generated may not be enough to sustain the lifestyle that they are accustomed to and this is where a reverse mortgage can assist.
Let's now take a look at some of the more commonly asked questions with regard reverse mortgages:
Why consider Reverse Mortgages?
One of the key reasons that a reverse mortgage is considered is to help you sustain your lifestyle throughout the years after retirement.
Many people cannot simply rely on the aged pension to help them have a lifestyle which they are accustomed to and a reverse mortgage can be an option you choose to help you in this area.
Many people also opt for a reverse mortgage as they are asset rich although cash poor so this means that their money is tied up in bricks and mortar.
What a reverse mortgage allows you to do is tap into the equity available in your home without having to make regular mortgage repayments as per a traditional mortgage.
Reverse Mortgages versus Standard Mortgages
A reverse mortgage versus a traditional mortgage has the difference of not needing to make regular mortgage repayments.
This is where a reverse mortgage differs from a standard mortgage which does require you to make regular repayment.
In essence this home loan facility allows you to use the existing equity in your property to maintain a lifestyle or make personal purchases and not have to make mortgage repayments.
How this works is that the interest payable on a reverse mortgage is capitalised on top of the balance owing so the interest accumulates over time.
There are two ways to offset this and that is through growth in the value of your property over time and also if the property is sold.
If the property is sold then the reverse mortgage can be paid out in its entirety leaving the balance available to you or your beneficiaries whichever may be the case.
If you want to know more about reverse mortgages then simply contact us and a consultant will be happy to help.
How do I qualify for a Reverse Mortgage?
As mentioned previously, reverse mortgage are a specialist financial product which is specifically designed for those in retirement or over a certain age.
Most commonly the criteria for obtaining a reverse mortgage home loan is that the applicant is 60 years of age or older.
There is no calculation of income, savings or assets as the reverse mortgage is based on the age qualification criteria and the value of your property.
There are a number of reverse mortgages in the market and we will investigate the most appropriate reverse mortgages based on your circumstances so contact us and we will do the rest.
How much can I borrow with a Reverse Mortgage?
Reverse mortgage do not require evidence of income to assess your borrowing capacity.
Instead the amount you could borrow on a reverse mortgage is determined by your age or the age of the youngest borrower and the value of your home you will use as security.
The age is the key factor in determining the percentage value of your home you can borrow, for example if you or the youngest borrower is 60 years of age then you could potentially borrow up to 15% of your homes value with a reverse mortgage.
If the youngest age were 70 then you would potentially be able to borrow up to 20% of the homes value on a reverse mortgage.
An important note is that of choosing a reverse mortgage provider who offers a no negative equity guarantee as this ensures there is always equity left in the property for yourself or your beneficiaries.
To obtain more detail on reverse mortgages simply contact us and a consultant will assist.
Important Features and Options of Reverse Mortgages
There are some key features and options available to you when it comes to reverse mortgages and we have listed some of then below for your reference:
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Do you wish to receive your reverse mortgage funds in a lump sum or by way of regular payment of a nominated amount? |
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You can choose between a fixed reverse mortgage interest rate or a variable interest rate |
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You can set up a ‘master limit’ where you can choose to draw on funds from your reverse mortgage as you see fit |
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You can choose to receive a lump sum up front and the balance can then come in the form of regular payments to you through your reverse mortgage |
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Should you choose a reverse mortgage which offers a negative equity guarantee? |
These and other options are available to you through a reverse mortgage but you can find out more by contacting us and having a chat to a consultant.
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