It is usually used to finance various expenses that are essential in maintaining the quality of life among seniors.
What is a reverse mortgage loan?
It somehow shares some semblance with the equity loans as it releases the property’s equity and converts it into cash. With the funds generated from this loan, property owners can use it for various purposes, including monthly stipend, cash to cover medical expenses or home renovations, purchasing a new car, debt consolidation; and travel expenses, among others.
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.
How does a reverse mortgage work?
When planning to apply for this specialised loan, lenders should take note that most lenders give preferential treatment to much younger borrowers.
At the age of 60 you can borrow 15% of their property’s value. If you’d reach 90, considering their property’s value appreciates up to 40% of the property’s value.
You are also free to choose whether they want to get the lump sum of the amount, in the form of a cash reserve, or a regular advance. You can also choose to combine these three options.
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The reverse mortgages are repaid when the borrower sells the property or when the lodged owner/s passes on.
Which banks offer reverse mortgages in Australia?
Not all banks in the country offer this specialised loan. That’s why it pays to know which banks offer reverse mortgages here. This includes G&C Mutual Bank, the Heritage Bank, IMB Bank, and P&N Bank, among others.
What to do next?
Once you’ve chosen which loan product perfectly fits your needs and your profile, the thing you need to take care of is the next process.
Working with a professional broker with an extensive network of lenders is the best option for you if you want peace of mind.
However, you can also go directly to lenders and apply for your preferred home loan, but it has its inherent advantages and disadvantages--your options are limited, thus, you are unlikely to get the best deal at reasonable rates.
Darin Hindmarsh is the founder and CEO of Intellichoice Finance, a broking firm based in Brisbane, where he specialises in owner builder loans. 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. Like and follow them on their Twitter and Facebook accounts.