Reverse Home Loans

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What is a Reverse Home Loan?

A Reverse Mortgage (also referred to as Equity Unlock for Seniors/Senior’s Loan/Reverse Home Loan) is a flexible financing solution for homeowners aged 60 and over (age restrictions depend on the bank), who are typically asset rich but cash poor.

It allows you to convert the equity in your home into cash for personal use.

How much can I borrow?

The amount of equity that can be released is determined by your age and the value of your home.

What interest and fees are payable?

Interest, fees and charges differ depending on the bank you choose; however, interest is capitalised (charged back to the loan of the account) and you are not required to make repayments (although you can).

The debt, including all interest and fees owed, is repaid to the lender when you sell your home, when you move for more than 12 months (i.e. move to aged care), or when you pass away.

How can I access the Reverse Mortgage funds?

It depends on the bank you choose, but you can usually take the funds as a lump sum, a regular income stream or a cash reserve.

Pros

No negative equity guarantee – most banks provide this guarantee so you can rest assured you won’t leave any debt to your family.

Complete flexibility – you can choose how to access your funds.
Repayments aren’t mandatory – you don’t need to pay for the interest and fees charged upfront; you can add this to the loan.
Easy way to access funds – you don’t need to apply for a personal loan or ask family members for money.

Cons

Fees and charges apply.
Your debt will increase – interest compounds monthly over the term of the loan.
Your equity will decrease, leaving less behind for your beneficiaries and for your future needs (i.e. aged care or medical expenses).
Your government pension may be affected.
Others living in the property will need to move out if the loan needs to be repaid from the sale of the property.