If you are age 60 or over and own your own home, a reverse mortgage can allow you to borrow money by using the equity in your home as security. Equity is the value of your home less what you owe on your mortgage. By converting your equity into cash this can help supplement your retirement income.
How does a reverse mortgage work?
Unlike a ‘regular’ mortgage which requires regular repayments, a reverse mortgage allows the borrower/s to access equity in their home without the need to make repayments. Interest is calculated on the loans balance and added to the loan monthly. The loan is repaid when the last resident vacates the property for example due to downsizing, sale, passing away, moving into care, or with family.
The borrowed funds can be used for a wide range of purposes such as:
· Debt consolidation
· Securing a place in aged care
· Medical bills
· Home renovation and maintenance
· Living expenses during retirement
The amount you can borrow is generally dependent on your age and value of your home. How you choose to receive your borrowings is flexible. You may have the option to take out your borrowings as a lump sum, income stream, line of credit or a combination of these.
Additionally, the Government has introduced negative equity protection on all reverse mortgage contracts taken out after 18 September 2012. Negative equity protection means you will be protected from owing the lender more than the value of your home. As a general example if your home is sold for less than the outstanding amount on your reverse mortgage, you will not be held liable for any loan amounts in excess of the proceeds from the sale. If your property sells for more than what is owed on your reverse mortgage, you or your estate will receive the additional funds.
Talk to a Suitable Loans Asset Finance Broker today.