Powered by momentummedia
nestegg logo
Powered by momentummedia
nestegg logo
nestegg logo

Retirement

Reverse mortgage ‘misconceptions’ holding retirees back: Lending specialist

By Lucy Dean · August 30 2018
Reading:
egg
egg
egg

Retirement

Reverse mortgage ‘misconceptions’ holding retirees back: Lending specialist

By Lucy Dean
August 30 2018
Reading:
egg
egg
egg
Mortgage, mortgage house, misconceptions in mortgage

Reverse mortgage ‘misconceptions’ holding retirees back: Lending specialist

author image
By Lucy Dean · August 30 2018
Reading:
egg
egg
egg
Mortgage, mortgage house, misconceptions in mortgage

Equity release products can help retirees’ achieve their desired lifestyles, but retirees are concerned the price of this lifestyle could be too high, a broker has said.

The corporate regulator’s major review of the reverse mortgage market, released this week, found equity release products can help retirees fund their desired lifestyles, but poor understanding of the costs and perfunctory lender checks are stinging some.

Speaking to Nest Egg, reverse mortgage specialist at Omniwealth Ambreen Sumar said there are “so many misconceptions” about the product, and that the ASIC report highlighted the importance of clear communication.

This means going beyond explaining fully and correctly and ensuring elderly clients actually understand what they’re signing up for, she said.

It also means involving the family, so they understand how it works and how clients can achieve their goals without losing the family.

Advertisement
Advertisement

For clients, Ms Sumar explained, the main concern is “that they're going to lose their home, but that is not the case”.

She explained that retirees can put in place equity protection schemes, allowing them to nominate the amount of equity they protect.

Additionally, clients can work with planners and brokers to build a strategy to protect their children’s inheritances.

For example, an age pensioner couple both aged 70 with a property valued at $1.5 million could take a reverse mortgage loan of $300,000 for renovations and to go on a holiday with their grandchildren.

“At age 70 they would be eligible for 25 per cent of the value of the home as a loan with a 6.29 per cent interest rate,” Ms Sumar said.

“Normally, there are no repayments required with reverse mortgage loans. However, their children decided that they would contribute the interest only component or any contribution equally between them, so the loan amount does not increase and the impact on their inheritance is minimum.”

The mortgage broker said this shows the different options available to retirees, but emphasised the importance of having a strategy.

 

Reverse mortgage ‘misconceptions’ holding retirees back: Lending specialist
Mortgage, mortgage house, misconceptions in mortgage
nestegg logo

Forward this article to a friend. Follow us on Linkedin. Join us on Facebook. Find us on Twitter for the latest updates
Rate the article

Join the nestegg community

We Translate Complicated Financial Jargon Into Easy-To-Understand Information For Australians

Your email address will be shared with nestegg and subject to our Privacy Policy

LATEST POLL

Are you seeking alternatives to equity and property in the next 12 months?

Yes - 44.4%
No - 55.6%

Total votes: 473
The voting for this poll has ended

From the web

Recommended by Spike Native Network

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.