A reverse mortgage can be a useful mortgage if you are struggling to access cash in your senior years.
Reverse mortgage is a complex loan that is offered specifically for home owners in their senior years who may need more cash than their retirement income can provide. It is a type of loan a home owner can take out against a portion of their home’s equity.
But unlike typical loans, borrowers are not required to make any form of payment for the life of the loan and they retain legal ownership of the property. This means people with this loan are allowed to stay in their home and not repay the loan until they decide to sell their house or they pass away.
Australian seniors typically take out a reverse mortgage in order to augment their retirement income, repay their debts or to do improvements on their homes.
What is a reverse mortgage?
Reverse mortgage is only available to individuals in their retirement age, which means an applicant would have to be at least 60 years old to qualify for one. Of course, the age requirement could still differ depending on the lender, so while one lender may allow a 60-year-old to apply for a reverse mortgage, another could increase the age requirement to 65 years instead.
The loan-to-value ratio would depend on the borrower’s age, which means the older the borrower is, the more money they could access from the lender. Depending on an individual’s circumstances, they may be able to choose a lump sum or a regular income stream.
To learn more about how reverse mortgage works and what legal protections exist for borrowers who sign up for one, read here.
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