What age do I need to be to qualify for a Reverse Mortgage?
The youngest property title holder needs to be at least 60 years of age.
Is my home valued when applying for a Reverse Mortgage?
Yes, your home will be valued by a licensed valuer, which is normally arranged by the lending institution.
Is there a limit to how much I can borrow?
Yes. The maximum loan amount is based on a formula that considers the age of the youngest borrower and the value of your home. The older the age of the borrowers, the greater the maximum loan limit or loan to valuation ratio (LVR).
How is interest calculated?
Interest is calculated the same way as regular mortgages. Interest is calculated on the daily balance and capitalised to the loan monthly in arrears. If no regular repayments are made then the loan balance will gradually increase over time.
When does the loan have to be repaid?
Either when the home is sold, the last borrower moves out of the home, or upon the death of the last borrower.
Can I repay the loan early?
Yes, you’re able to repay the loan at any time.
Do I need to make regular loan repayments?
No, the lenders do not require any regular loan repayments, however, you can make loan repayments if you wish.
Are there restrictions on how I can use the loan funds?
No. They can be taken as a lump sum, regular income payments or a combination of both. Most lenders also provide the ability to have loan funds available as a reserve, meaning that you can draw down on the loan as funds are needed. The benefit of a loan reserve is that interest does not accrue until you actually draw down on the loan.
Do I still retain the ownership of my home?
Yes, the title remains in your name. As with any home loan, the bank registers the mortgage with the Lands Title Office and states their interest on your title.
Do you pay interest on funds that have not been drawn down from the loan?
No, interest is only calculated on the funds you’ve drawn down from the loan.
Will my beneficiaries be responsible for my loan?
Yes, the lender generally requires the loan to be finalised within 6 months of death. This allows your family the option of either repaying, refinancing the loan or selling the property.
Does a Reverse Mortgage affect Centrelink/DVA benefits?
From our experience, generally not, although this depends on how the funds are used and the amount you draw down. Nevertheless, for peace of mind it’s recommended you seek confirmation before arranging the loan.
If I have an existing home loan, can this be transferred to a Reverse Mortgage?
Yes, provided the loan amount is within the loan limit (LVR). The Reverse Mortgage lender must be listed as the first mortgagee on the property title.
Can the Reverse Mortgage loan ever end up being greater than the value of my home?
Even if the Reverse Mortgage loan were to be greater than your home value, you’re protected by the ‘No Negative Equity Guarantee’. The lender cannot ask you to leave your home. Triggering the guarantee would be a rare occurrence because of the conservative loan limits offered by lenders.
Can I get a Reverse Mortgage if I live in the country or outside the metropolitan area?
Each lender has different criteria and conditions, which may include restrictions on certain postcodes. In general, residential properties on normal size titles, situated in cities and large towns are most favourable to lenders.
How do I protect the ownership in my home?
Under the National Consumer Protection Act 2009, lenders who provide Reverse Mortgages (Seniors Equity Release Loans) must include a ‘No Negative Equity Guarantee’ which means that even if the loan exceeds the value of your home, the lender has no recourse for the loss.
What is an Aged Care extension?
On vacating your home to take up residency in an Aged Care facility, some lenders allow an extension of up to two years before the Reverse Mortgage loan needs to be repaid. An extension may be possible though there are specialist loan products for Aged Care funding.
Do I need to seek legal advice when arranging a Reverse Mortgage?
Most lenders require that you seek legal advice before proceeding with the loan documentation. The reason for this is to ensure you receive independent professional advice. It is important that you are fully aware of what you are signing and the consequences of a Reverse Mortgage.
Can all mortgage brokers arrange Reverse Mortgage loans?
No, brokers must be accredited with each lender and maintain their registration. This is a specialist area of lending that requires specialist knowledge.