Australia tries to help its older residents by offering reverse mortgages. People over 60 years old can qualify for a reverse mortgage, which allows for the equity of a home to be turned into cash. Since many retired citizens live on a fixed income, being able to cash in on their home’s equity provides funds that can be used for cost of living expenses, medical care or even holidays.
If you’re in the qualifying age bracket for a reverse mortgage, it’s a good idea to work with a mortgage broker in Rockingham, Kwinana or Baldivis to ensure that you get the best terms and conditions on the mortgage.
What Exactly Is a Reverse Mortgage?
A reverse mortgage is a type of home loan. Kwinana, Baldivis and Rockingham residents that need cash but have limited income can take advantage of this loan for immediate cash. The loan amount is based on the borrower’s age, the location of the property, the value of the property; and this is governed by the terms of the lender regarding minimum and maximum loan amounts.
The lender will take into consideration all factors that affect the loan and determine the amount eligible for the reverse mortgage. In some cases, you can get a reverse mortgage worth 50% of your home’s value. This means that if your home is worth $300,000, you are eligible to receive $150,000 in cash.
Repayment Terms of a Reverse Mortgage
When you qualify for a reverse mortgage, you can choose to take the money in one lump sum, as regular monthly payments or as a revolving line of credit. You do not owe any repayment on the mortgage unless you sell the home or breach the contract.
Upon a borrower’s death, the lender will recoup the mortgage and interest fees from the estate. Most lenders will not allow for negative equity. This means that if the value of your home drastically decreased after taking out a reverse mortgage, the lender will not go after your family to recoup the balance of the mortgage. The lender will simply take the money earned from the sale of the home.
Benefits and Disadvantages
The benefits of a reverse mortgage are that you can get quick access to needed cash without worrying about repayments. In most cases, you can also repay early without penalties. A disadvantage is that the interest rates for reverse mortgages are often much higher than traditional loans. This can put you in more debt later in life, especially if you need to sell the home. It’s best to speak with mortgage brokers in Baldivis, Kwinana or Rockingham to determine if a reverse mortgage is right for you.