Reverse mortgages

The amount you can borrow depends on your age, home value, and the lender's policies. Generally, you can borrow 15-20% of your home's value at age 60, increasing by about 1% per year of age. For example, at 70, you might borrow 25-30%, and at 80, up to 35-40%. We can help you calculate your potential borrowing capacity based on your specific circumstances.

A reverse mortgage may affect your pension eligibility. The funds received are not considered income, but they may be counted as an asset by Centrelink. This could potentially reduce your pension payments. We recommend speaking with a financial advisor or the Financial Information Service at Services Australia to understand how a reverse mortgage might impact your specific situation.

Negative equity protection is a legal requirement for all reverse mortgages in Australia, introduced in 2012. It ensures that you will never owe the lender more than the market value of your home when it's sold. This protection gives borrowers peace of mind that they or their estate won't be left with additional debt if the loan balance exceeds the home's value.

You can still leave your home to your children, but a reverse mortgage will reduce the equity available in your estate. When the loan becomes payable (usually when you move out or pass away), your home will be sold to repay the loan, and any remaining equity will go to your estate. It's important to discuss your plans with your family and consider how a reverse mortgage might impact their inheritance.

You're free to sell your home at any time. When you sell, the reverse mortgage loan becomes payable in full, including the accumulated interest. After repaying the loan, any remaining equity is yours. If you want to move to a new home, some lenders offer the option to transfer the reverse mortgage to a new property, subject to their approval.

There are ongoing costs to consider. These typically include:

• Interest charges (which compound over time)
• Ongoing account fees
• Property valuation fees (which may be required periodically)
• Home insurance premiums (as you're required to maintain adequate insurance)

We'll help you understand all the costs involved with your chosen reverse mortgage product.

Most reverse mortgage products allow you to make voluntary repayments without penalty. Making repayments can help manage the growth of your loan balance. However, it's not required, and many borrowers choose not to make repayments. We can help you understand the repayment options for different reverse mortgage products.

Some reverse mortgage contracts include tenancy protection clauses for non-borrowing residents (such as a spouse who isn't on the title). This allows them to continue living in the home even if the borrower moves out or passes away. However, this isn't standard in all contracts. We'll help you understand the protections offered by different lenders and ensure you choose a product that suits your household situation.

A reverse mortgage is one of several equity release options available to seniors. Others include:

• Home reversion schemes (selling a portion of your home's future value)
• The government's Home Equity Access Scheme

Each option has its own pros and cons. We can provide information on these alternatives and help you determine which option best suits your needs.

Lenders typically require:

• Proof of age and identity
• Details of your current home loan (if any)
• Recent council rates notice (to confirm property ownership and value)
• Information about any other debts secured against your home
• Estimate of your home's value

Some lenders may also require a formal valuation of your property. We'll guide you through the specific requirements for your chosen lender.