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A. A reverse mortgage allows you to borrow money using the equity in your home as security. Interest is charged like any other loan, but you usually don’t need to make repayments while you live in your home. The loan must be repaid in full if you sell your home or die or, in most cases, if you move into aged care. Typically, you are charged a higher interest rate on a reverse mortgage than for a standard home loan.
A. The money from a reverse mortgage can be used in a variety of ways, for example:
A. The sole applicant and in case of a joint application, the youngest borrower must be 60 years of age or older. In the case of multiple applicants, all applicants must be 60 years of age or older and hold title to the property either as joint tenants or tenants in common. Eligibility also depends on the property’s value (determined by G&C Mutual Bank) and its location. You may also be eligible for a reverse mortgage even if you still owe money on your home.
The maximum amount available to borrow is assessed on the age of the youngest borrower and the loan to value ratio.
The value of the property is assessed and then, based on the valuation, the borrower may be eligible for the following amounts:
|60 - 64
|Lower of $200,000 or 15% of value of property
|65 - 69
|Lower of $250,000 or 20% of value of property
|70 - 74
|Lower of $300,000 or 25% of value of property
|75 - 79
|Lower of $350,000 or 35% of value of property
|Lower of $400,000 or 40% of value of property
Regular loan repayments are not required. However you are free to make voluntary repayments of any amount (and redraw these amounts, for a fee) or repay the loan via lump sum repayments at any time at no extra cost or penalty.
Provided you are not in default, the loan will be repaid when:
(a) the mortgaged property is sold on your death or death of the last borrower;
(b) the mortgaged property ceases to be your principal place of residence or that of the last surviving borrower; or
(c) in case of an investment property or holiday home, on the death of the last surviving approved resident.
There are several risks associated with Reverse Mortgages. Chiefly among them:
Read more about the negative equity protection on the Australian Securities and Investments Commission’s (ASIC) MoneySmart website.