A reverse mortgage offers an excellent way to increase your income during retirement. With a reverse mortgage, you’re able to borrow against the equity in your home, yet you still retain ownership of your residence. One of the benefits is that you won’t need to make any payments like you would on a conventional mortgage, these are purely at your discretion. You can draw a small amount from the lender on a regular basis, which with a little consultation with Centrelink, will not impede on any of your current pension entitlements. You can also opt for monthly payments or a lump sum payment.
If you permanently move from your home, sell the property or pass away, the reverse mortgage has to be repaid, but all SEQUAL accredited reverse mortgages guarantee no negative equity and even of the mortgage exceeds the value of your home, you can still remain there for life.
When to Get a Reverse Mortgage?
When can a reverse mortgage benefit you? If you’re having a tough time affording a comfortable retirement, a reverse mortgage can be an excellent option. Your home is likely to be your largest personal asset, and your home may even be completely paid off. With a reverse mortgage, you can increase your income without increasing your monthly expenses, and you still get to stay in your own home.
The amount of money you’re eligible to receive will depend on several factors, including interest rates, your current age, and the home’s value. The older you are, the lower the greater the amount of equity you can access, plus, the more your home is worth, the more money you are eligible to receive.
Downsides to a Reverse Mortgage?
If you permanently move from the home, you will need to pay off the loan, which is another potential downside. While it may not sound like an issue right now, if you need full-time care at a senior facility, your loan would be due if you were out of the home for more than a year. Reverse mortgages also affect your estate by decreasing the equity in your home, leaving your heirs with less money. But by thoroughly exploring your options with a SEQUAL accredited broker, you can take significant steps to either minimise, or at least be aware of any potential pitfalls associated with a reverse mortgage.
Some Important Myths and Truths About a Reverse Mortgage
Before considering a reverse mortgage, it’s important to understand the truth about them. Unfortunately, there are many common myths surrounding these complex loans. Here’s a closer look at some common myths and the truth behind them.
Myth #1 – The Title to Your Home Goes to the Lender
Actually, you still own your home, since the reverse mortgage is just a mortgage against your home.
Myth #2 – Your Loan Could Be More Than the Property Value
You don’t need to worry about your heirs being left with a bill if you die or leave your home. This type of loan will never be more than the home’s appraised value at loan maturity, as long as there is a ‘No Negative Equity Guarantee’.
Myth #3 – If You Have a Current Mortgage You Can’t Get a Reverse Mortgage
Technically, this is true, but if you use the proceeds of the reverse mortgage to pay off the existing mortgage at close, you still can get the reverse mortgage if you meet the lenders criteria.
Myth #4 – You Could Be Evicted From Your Home
You are the one who chooses if and when you leave your home. Having a reverse mortgage will never force you to leave your home, since it’s not due until you no longer call that home your primary residence.
The opportunities and negatives of a reverse mortgage should now be a little clearer.
If you’re looking for some advice or looking into alternative finance options, contact us today for a chat and plan an approach to suit you.