:: Reverse Mortgages
Q. What exactly is a reverse mortgage?
A. A reverse mortgage or senior’s equity loan as it is also know is a way of borrowing money  against the value of your home or investment property without having to make regular repayments. The loan is usually repaid out of the proceeds of the borrower’s estate.
Q. Does this mean I don’t own my home any more?
A. No. The title to the security property (your home or investment property) always remains in your name. The lender will register a mortgage over the property to secure their loan. This mortgage will be discharged when the loan is repaid.
Q. How much can I borrow?
A. This depends on your age. The minimum amount you can borrow is usually $10,000. The maximum amount will depend on your age and the value of your property. For example if you are aged 60 then you will be able to borrow approximately 15% of the value of your property as assessed by an independent valuer. If you are aged 80 you can borrow up to 35% of the value of your property.
Once you have established your reverse mortgage you can borrow more money if you need to based on your age,
Q, But I don’t have any income other than the pension. How will I make repayments?
A. You are not required to make any repayments until you either sell or transfer the home, or title to the home passes to your estate. Naturally you are required to maintain insurance on the property and keep it in good order.
Q. What interest rate applies?
A. You can choose a variable interest rate or you can choose to fix the interest rate for some or all of your loan. Rates change frequently and are different for each lender. It is not possible to quote an exact interest rate . If you would like an interest rate quote please contact us.
Q. What if I end up owing more than my property is worth?
A. No. Most reputable reverse mortgage providers give you a “no negative equity pledge”. This means that you will never be asked to repay more than the value of your home.
In addition you can choose to protect a portion of the value of the home to pass onto heirs or to set aside for future healthcare expenses.
Q. What can I use the money for?
A. You can use the money for anything you wish. Many seniors use reverse mortgages to pay for overseas trips. You can use the money to live on to supplement your pension or even help your children or grandchildren if you wish. It is entirely up to you. Some reverse mortgage lenders will also lend for the payment of an accommodation bond needed for entry into a nursing home.
Q. Are there any fees and charges?
A. Fees and charges vary between lenders. Most lenders charge an application or establishment fee but this is usually deducted at settlement of your loan. You do not usually have to pay any up front fees. Most reverse mortgages do not have any ongoing monthly or annual fees.
Q. How do I know which product is best for me?
A. The first step to finding the best reverse mortgage for your circumstances is to make an appointment with a Shire First Mortgages loan consultant. They will sit down with you and explain all of the different products helping you choose the best one.
It is also important for you to speak with Centrelink about any implications a reverse mortgage may have on your pension entitlements.
You will also be asked to get independent legal advice before signing any mortgage documents and we strongly advise that you also speak with a financial advisor if you have one.
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