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What is a Reverse Mortgage?

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A reverse mortgage allows you to borrow money using the equity in your home as security. The loan can be taken as a lump sum, a regular income stream, a line of credit or a combination of these options.

No income is required to qualify. Interest is charged like any other loan, except you don't have to make repayments while you live in your home - the interest compounds over time and is added to your loan balance. You remain the owner of your house and can stay in it for as long as you want. You must repay the loan in full (including interest and fees) if you sell your home or die or, in most cases, if you move into aged care.

A reverse mortgage is a complex product that can have a significant impact on your finances and relationships, and your quality of life in retirement.

Some important things to consider before you decide to take out a reverse mortgage.

You should also seek independent financial and legal advice and speak to your partner/family before you make the decision to proceed.

You may borrow from 15% to 40% of the value of your home depending on your age. The older you are, the more you can borrow. The minimum amount you can borrow depends on the provider - it may be as low as $10,000. The maximum amount depends on the value of the property. If you borrow to the maximum now, you may not have access to any more money later down the track.

Some of the risks that you need to consider are that Interest rates are generally higher than average home loans. The debt can rise quickly as the interest compounds over the term of the loan - this is the effect of compound interest and is something you need to be aware of before making any decisions. The loan may also affect your pension eligibility and you may not have enough money left for aged care or other future needs.

With a Reverse Mortgage you could also end up owing more than your property is worth unless your loan has a No Negative Equity Guarantee and you could lose this guarantee if you don't repair and maintain your property to a standard set by the lender.

As Reverse mortgages are complex and heavily regulated I have referenced from the ASIC website www.moneysmart.gov.au from which you can access all of the information in relation to reverse mortgages and their reverse mortgage calculator.

I am accredited by SEQUAL to discuss and submit reverse mortgages if you need to sit down and discuss at length.

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