Help your clients with professional advice
Reverse mortgages give people over age 60 the ability to draw against the value of their home for additional income or capital without needing to make repayments. As these specialised loans become more popular, it will be increasingly more important for you to stay informed so that you can provide meaningful advice that is specific to your clients’ needs.
The aim of this site is to keep you informed and provide resources to enhance your advice model as a point of difference. In many cases this may help you to extend the relationship you have with existing clients by ensuring their financial well-being, security and peace of mind.
Key facts about reverse mortgages
- Reverse mortgages are specialised loans only available to those over age 60 who own their own home. Lenders are conservative in their approach and only lend between 15 – 45% of the home value, depending on age. When the last spouse passes away or the home is sold the loan is then repaid.
- The main advantage of a reverse mortgage over a traditional loan is that repayments are not required. Repayments can be made if and when the borrower chooses to.
- Clients cannot lose their home. Reverse mortgage lending products protect their borrowers with ‘No negative equity guarantees’, which ensures that the loan will not grow larger than the value of their home. The risk is entirely with the lender who must wait many years before they are repaid.
- Drawdowns are classed as capital and therefore not assessed for Centrelink purposes, assuming the funds are spent as they are received within 90 days and not accumulated. If a client uses the drawdown to invest or purchase an asset (such as a new car) then this will be assessed and may affect pension eligibility.
- Loans can be set up to draw a lump sum, regular income payments or purely as a facility that could be used just in case.
How a reverse mortgage can help your clients
Reverse mortgages are often thought of as last resorts for people who have run out of options, which is true in some cases, however there are a range of other applications which should be considered as part of your clients’ broader financial strategies.
- Top up regular income. Clients who are struggling on a fixed income can draw down a regular monthly payment to assist with their cost of living or make ad-hoc withdrawals to pay for once-off expenses.
- Reduce the need to sell down investments during volatile or negative markets. Income can be supplemented by using a reverse mortgage to reduce the reliance on existing investments, giving them time to recover. This can help them to preserve their retirement savings.
- Take advantage of deductible super contribution caps while still working. Some clients may want to reduce their taxable income by making a deductible contribution into super before they retire. A reverse mortgage can give access to funds to make this possible. Advice should be sought to weigh up the overall cost and tax advantages.
- Aged care funding at short notice. Accommodation bonds allow funds to be drawn against the home to pay for aged care costs without the need to sell. This gives the family time to make a decision on whether to keep, sell or rent the house in an orderly fashion.
- Convert existing loans to one that does not require a repayment. Many people are carrying debt into retirement, which can be extremely difficult to service while on a fixed income. A reverse mortgage does not require repayments, which will provide relief to a great number of people.
We are the only specialist Reverse Mortgage broker in South Australia with over 10 years’ experience and first hand practical knowledge of adapting the loan product to a range of financial strategies that create unique client outcomes.
If you are interested in learning more about how your clients could benefit from using a reverse mortgage, please feel free to call us on 8333 1455.