If you’re age 60 or over, own your home and need to access money, releasing equity from your home may be an option. There is risk involved and a long-term financial impact. Get independent financial or legal advice before you go ahead.
Believe it or not, this is a type of mortgage that actually exists. It’s called a reverse mortgage and it’s typically available to people over the age of 65 who want to borrow money by using the equity in their home.
Typically, securing a home loan means saving up a deposit, borrowing money from a lender and committing to monthly loan repayments. But with a reverse mortgage, homeowners are able to tap into the value of their existing home and receive a lump sum payment or line of credit.
This unique type of home loan is available to older Australians over the age of 60 and is used to convert a home’s equity into cash.
As an equity release product, a reverse mortgage is designed for homeowners that are “asset rich” (a.k.a. they own their home outright) but “cash poor”. That’s why it’s often used by homeowners who are navigating financial stress but don’t want to sell their home or face immediate loan repayments.
Ways to access equity in your home include:
- reverse mortgage
- home sale proceeds sharing (home reversion)
- equity release agreement
- the Government’s Home Equity Access Scheme (formerly the Pension Loans Scheme)
Interest rates on reverse mortgages are often significantly higher than a regular mortgage because of the fact you don’t have to immediately repay the loan. The average variable rate on a reverse mortgage is around 6 to 7%, though this number can vary between lenders.
If you would like a referral to a Mortgage Broker who could help you understand if a Reverse Mortgage is for you, call Kath on 0458 912 906.
