But not everyone is aware of how reverse mortgage works that is why not all of those who qualify for this loan actually apply for it.
If you're in your 60s and just want to enjoy life to its fullest or perhaps want some cash to finance important family milestones such as weddings or family travel, this is a type of loan that is worth considering.
How does this work?
Reverse mortgage is a type of home loan that is ideally designed for people in their 60s.
It is usually used to finance monthly stipends, cover medical expenses, home renovations, purchasing a new car, debt consolidation; and even personal travel expenses or vacations, among others.
Just like in home equity loans, it releases the property’s equity and converts it into cash.
Generally, borrowers need not pay the mortgage as the loan is repaid from the future sale of the property.
But if the borrower prefers making some repayments, then it’s also possible.
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The amount that borrowers can take out is determined by different factors, including the property’s value and age of the borrower. The more senior the borrower, the higher the amount they can borrow.
At the age of 60, homeowners can borrow 15-20% of their property’s value--that’s roughly.
If they’d reach 90, considering their property’s value appreciates, they can borrow up to 40%.
They are also free to choose whether they want to get the lump sum of the amount, in a form of cash reserve, a regular advance. They can also choose to combine these three options.
How to repay the loan
Since this loan is intended for seniors who have an existing property, they can actually apply for a mortgage and without even worrying about repayment as the future sale of their property will cover it.
The reverse mortgages are repaid when the borrowers sell the property or when the both of them pass on.
Darin Hindmarsh is the founder and CEO of Intellichoice Finance, a broking firm based in Brisbane. He's been providing financial and broking services in the past 18 years. Hindmarsh is also finalist in the 2020 Australian Mortgage Awards - Pepper Money Broker of the Year – Specialist Lending. To jumpstart your home loan application, visit their home loan online application page today.!