A reverse mortgage is useful for seniors looking to utilise the equity in their property to help with the expenses that come with advancing age.
Heartland Seniors Finance is one of Australia’s leading reverse mortgages lenders. A reverse mortgage enables seniors to access the equity in their property to help them live comfortably in retirement without having to sell their home.
Heartland Seniors Finance partners
As well as offering reverse mortgages directly and through a broker, Heartland Seniors Finance also partners with other lenders to offer the same reverse mortgage products to customers of these lenders. Some of its partners include:
- Heritage Bank
- Greater Bank
- Police Credit Union
What to consider before taking out a Heartland Seniors Finance reverse mortgage
Due to the unique nature of a reverse mortgage, there are a lot features and aspects that you should consider before you decide to go ahead with it.
- Loan options. You can choose to take out a standard reverse mortgage, which allows you to borrow the equity from your home to help you pay for whatever you need, or you can opt for the Aged Care option, which is limited to a five-year loan term and is helpful if you are planning to move into a permanent long-term care facility or you are currently living in one and you need funds to help pay for it.
- Customer lending criteria. You must be aged 60 years or over. A maximum of two customers are allowed to apply for the same loan. A power of attorney can apply for a reverse mortgage, subject to the lender’s approval.
- Loan purpose. There is no real restriction as to what you can use the funds for. Purposes could include home improvements, motor vehicle needs, debt consolidation, in-home care, permanent long-term care or simply to ease the pressure of day-to-day living expenses.
- Property lending criteria. The property must be mortgage-free, residential, of conventional construction and in good condition. It cannot be a property within a retirement village. There can be a mortgage on the property if you intend to use the reverse mortgage to pay off this original home loan. The property must be valued at at least $200,000, depending on the location.
- Loan term. This loan can be taken out for a period of 5-10 years. If you opt for the Aged Care option you are restricted to a loan term of 5 years only.
- Payment options. You can draw the total amount of your property, or just a partial amount, however, what you draw will affect the equity of the property in the years to come. You are not required to draw all the funds upon taking out the loan. A minimum amount of $10,000 must be initially drawn and then you can opt for either regular payments of $2,500 per year (with quarterly or annual options) or $500 per month. The other option is to have the funds held in a cash reserve that you can apply to access at any time, but may you may not always be approved. Alternatively, you can mix and match how you access your funds.
- Loan repayments. There are no fees applied for the early repayment of your loan and loan repayments are not mandatory as long as you are not in default and you have not opted for the Aged Care option. The only time you will be asked to repay the loan is when the final named applicant passes away, moves into a permanent long-term care facility or the property is sold.
- Loan-to-value ratio (LVR). Your LVR will be calculated based on the age of the youngest applicant. However, if the property used for security is an investment or holiday home this amount will be reduced by 10%. Check out the table of LVRs for Heartland Finance Reverse Mortgage products.
- Loan increases. Once you have used the full amount of the loan, you can apply for additional funds to be lent to you, but note that you will go through the same application process as the original loan. Your new application will have a new valuation conducted, a new LVR will be applied and the original loan balance will be factored into the decision of whether you will be approved for a new loan.
- Equity protection. You can choose to protect a percentage of the net proceeds from the sale of the property. This allows you to retain complete ownership of that percentage of the property no matter the loan amount upon the discharge of the loan. However, this will reduce the loan amount available by the percentage that you choose to protect, either 10%, 20% or 50%.
What are the maximum LVRs for the Heartland Seniors Reverse Mortgage?
- Settlement fee: $495. This is a standard fee charged for the creation of your loan accounts with the lender.
- Valuation fee: $350. This fee is charged if the property is valued at less than $2 million. It will be waived if the loan proceeds to settlement. If the property is valued at above $2 million, you will be quoted a valuation fee.
- Cash reserve drawdown fee: $60 per drawdown. This fee is charged every time you are approved to draw upon the funds you have put into a cash reserve.
- Regular cash advance option fee: $295. This is charged when you opt to take a cash advance on your loan amount.
- Further advance fee: $395 (plus valuation fee).
- Mortgage discharge fee: $395. This is charged upon the closure of your loan accounts.
- Variation fee: $295. This is charged if, after approval, you ask to have your loan structure changed.
- Reissue of loan documentation fee: $295. This is charged if you request for your loan documentation be sent to you again (after it has initially been issued to you).
- Equity protection option fee: $295. This is charged if you opt to utilise the equity protection option.
Other legal or government fees may apply. Please seek legal and financial advice for more information.