Frequently Asked Questions
Below you will find answers to the questions we hear the most. If you can’t find what you are looking for here or elsewhere on our website, please contact us and we’ll be happy to help you.
There are many advantages to using a specialist broker. Firstly, they are qualified industry professionals who are familiar with all the current available loan products as well as the lenders. They have the tools and know how to explain how each loan works and what it costs (for example, interest rate, features, and fees). They are also bound by law to act in the best interests of borrowers when recommending any loan product, giving you added protection and piece of mind. They also do all the legwork, dealing with the lender, and managing the loan application process from start to finish.
A reverse mortgage is a loan designed specifically for people aged 55+ who own, or mostly own, their own homes. Unlike other types of loans, regular repayments are not required – but you can make voluntary repayments whenever you choose. You retain ownership of your home and remain living in it. The debt is repaid from the future sale of the home, which is generally when downsizing later in retirement or making the move into aged care.
If you are over 55, own (or largely own) your own home and live in a major Australian city or large regional town, you have already met some of the main eligibility criteria.
A reverse mortgage loan is repaid when the security property is sold. This generally happens many years in the future when the homeowners downsize or move into aged care.
You can repay the entire loan or make repayments to it at any time – without any penalities or charges.
You can nominate to receive the funds from a reverse mortgage loan as a lump sum or as monthly instalments to top up your retirement income. You can also leave the approved funds sitting there as a cash reserve, a bit like a line of credit, which you can draw down as you need. Funds drawn from the loan will be paid into your preferred bank account. You are only ever charged interest on the amount you have actually drawn from your reverse mortgage.
The average cost of setting up a reverse mortgage, including all the fees and charges from the lender, your broker and government charges, along with the cost of independent legal advice, is between $2,000 and $3,000. Noting, the cost of independent legal advice varies from lawyer to lawyer and state to state. We can help you work out all the fees and charges before you proceed, so you’ll by clear and know exactly what you’re up for.
With the right guidance, there may be no impact on your Age Pension entitlements. We can also help ensure that your reverse mortgage doesn’t impact the amount of Age Pension you receive. If you’re not receiving a full Age Pension, there are also some different ways you can structure your loan that may even enhance your Centrelink payments.
You can change your mind and sell your home at any time without incurring exit fees or penalties from the lender.
The No Negative Equity Guarantee (NNEG) was introduced in 2012 by the Australian Government. It is a law that protects reverse mortgage borrowers from owing lenders more than their home is worth. This means that if your property is sold for less than the amount owed to the lender, the reverse mortgage lender has to wear the loss – not you as the borrower.
Interest on a reverse mortgage is calculated in the same way as interest is calculated on a normal home loan – calculated daily and debited to the loan account monthly. However, interest on a reverse mortgage compounds because you are charged interest on your interest and you are also charged interest on any fees and charges that have been debited (only with your authority to do so or as per the terms and conditions) to the loan over time. This means that the longer you have the loan, the greater the amount you will have to pay back to the lender when the house is sold.
No. Australian borrowers are protected by law known as the No Negative Equity Guarantee (NNEG), and therefore cannot owe lenders more than their home is worth, regardless of what happens to the value of their property.
No. Unlike a traditional home loan, reverse mortgage borrowers retain ownership of their homes and the title remains in the name of the borrower. This mean you cannot lose ownership of your home.*
No. Australian reverse mortgage borrowers cannot by removed from their homes by the lender.*
No. A borrower cannot be forced to sell their home at any time against their will. Even if their home devalues dramatically, the borrower can continue to live in it for as long as they choose, repaying the lender only when the house is sold in the future.*
There is a significant financial cost to selling a home, not to mention an emotional one. According to an Australian Government Productivity Commission report, the vast majority of retirees (more than 80%) stated they wish to age in place. Selling up can also impact the amount of pension you are eligible to receive going forward.
While using some capital now will reduce the amount of equity you have in your home over time, with good planning you can make sure you have enough in later years to fund aged care and your children’s inheritance. Did you know you can also use a reverse mortgage for gifting and inheritance purposes right now? If you are receiving a Centrelink pension (e.g. Aged Care), you need to take care with any gifting.
In the earlier days of reverse mortgages, there were isolated reports of aggressive tactics by cavalier brokers which led to highly unsatisfactory outcomes. The introduction of sweeping industry reforms and new Government regulations in 2012 is considered to be an overwhelming success and set the highest industry benchmarks for reverse mortgage broking and lending. The Government through ASIC now regulate the entire industry and undertakes ongoing investigations to ensure standards are maintained in the best interests of borrowers.
*Terms and conditions apply and you will have responsibilities that you are required to meet under the contract.