Reverse Mortgages

A reverse mortgage lets older Australians borrow equity from their homes to spend when they need it.

A reverse mortgage is a way to access cash if you are:

• 60 or older
• Have equity in your property but don't have money in the bank when you need it.

A reverse mortgage lets you borrow a percentage of the equity in your property. You can use the cash to cover retirement costs, an overseas trip or a home renovation. The catch?

You repay the debt when you die. Or sell your home. While a reverse mortgage can be very helpful for the right borrower, it's important to understand that it will reduce your equity and thus the amount of property wealth your children could inherit.

Reverse Mortgage Offer

Heartland Seniors Finance Secondary Property Reverse Mortgage

6.54 % p.a.

variable rate

6.56 % p.a.

comparison rate

Reverse Mortgage Offer

Apply for the Heartland Seniors Finance Secondary Property Reverse Mortgage and enjoy flexible repayment plus pay no application or ongoing fees.

• Interest rate of 6.54% p.a.
• Comparison rate of 6.56% p.a.
• Application fee of $0
• Maximum LVR: 40.5%
• Minimum borrowing: $5,000

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Reverse Mortgage Comparison

Note: Before taking out a reverse mortgage, you should seek independent financial and legal advice.

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Name	Product	Interest Rate (p.a.)	Comp Rate^ (p.a.)	Application Fee	Ongoing Fees	Max LVR	Monthly Payment	Short Description
Heartland Seniors Finance Secondary Property Reverse Mortgage		6.54%	6.56%	$0	$0 p.a.	40.5%		A reverse mortgage that lets you access the equity in your investment property.	Go to site More info	Compare	loading Fetching your data...
P&N Bank Easy Living Home Loan		6.24%	6.34%	$395	$80 p.a.	35%		Borrow up to 35% LVR to help fund your retirement.	Enquire now More info	Compare	loading Fetching your data...
Heartland Seniors Finance Standard Reverse Mortgage		6.54%	6.56%	$0	$0 p.a.	45%		A reverse mortgage for homeowners over 60 wishing to access up to 45% of their property's value.	Go to site More info	Compare	loading Fetching your data...
Heritage Bank Reverse Mortgage - Standard		6.29%	6.31%	$995	$0 p.a.	45%		Get access to your equity to fund your lifestyle.	Enquire now More info	Compare	loading Fetching your data...
Commonwealth Bank Equity Unlock for Seniors		6.52%	6.59%	$950	$12 monthly ($144 p.a.)	40%		Unlock your equity with low ongoing fees and a $1,500 cashback offer for refinancers.	Enquire now More info	Compare	loading Fetching your data...
Heartland Seniors Finance Aged Care Option		6.54%	6.64%	$0	$0 p.a.	50%		A reverse mortgage designed to help fund your aged care costs.	Go to site More info	Compare	loading Fetching your data...
Heritage Bank Reverse Mortgage - Aged Care Option		6.29%	6.39%	$495	$0 p.a.	45%		Borrow up to 45% of your home's value if you're 60 or over.	Enquire now More info	Compare	loading Fetching your data...

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How does a reverse mortgage work?

Equity is the value of a property you own, minus any debts (such as mortgage debt). A reverse mortgage lets borrowers from the age of 60 to convert equity into cash. The equity in your home acts as a security.

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

Once the loan is approved, you can access your money to use however you wish, and the lender charges interest on the amount you owe. Generally, the amount of interest is calculated daily on the outstanding balance and represented as a single amount each month.

There are no repayments required by you to repay a reverse mortgage while it is current. Instead, the interest payments are added onto the loan balance each month.

How do I access the money?

The loan amount can be taken as one of the following, or a combination of the following:

• A lump sum.
• A regular income stream.
• A line of credit

How do I repay a reverse mortgage debt?

You repay your reverse mortgage debt when:

• You decide to sell your home.
• The last surviving borrower dies (if you take out the mortgage as a couple).
• The borrower moves into an aged care facility.

How much of my equity can I borrow?

Most lenders let you borrow between 15 and 45% of a property's value. And the older you are, the more you can borrow. If you're only 60 you're limited to borrowing 15% of the equity in your home.

The lender wants to make sure the equity in your property will be enough to cover the loan plus the interest.

For example, if your home is valued at $500,000, you're only able to access a maximum of $75,000. Even if you add five years of interest to this loan amount, the value of your home is still substantially higher than the remaining debt.

Some lenders have specific borrowing amounts depending on your age. Here's an example.

You can use our reverse mortgage calculator below to give you a clearer estimate of your borrowing power. The calculator takes into account the age of the youngest borrower in order to estimate the percentage of your home’s value that can be borrowed.

Learn more about reverse mortgage calculations here

Is there anything else I should know about these products?

Reverse mortgages can be risky products. They're aimed at older people and affect the value of the biggest asset most people own: their family home. That's not to say that reverse mortgages are bad, but borrowers need to do their research and decide if this is the right choice for them.

It's worth keeping the following in mind when considering a reverse mortgage:

• Higher interest. Interest charges are generally higher than typical mortgages. An average variable rate on a reverse mortgage is (at the time of writing) around 6.25%- 7.25%, however this will vary from lender to lender. As the interest compounds, the loan amount can increase rapidly.
• Pension eligibility. A reverse mortgage may affect your ability to qualify for the pension. Contact the Department of Human Services to find out how it could impact your eligibility to see if you can structure your reverse mortgage in a way that does not interfere with your pension benefit.
• Break fees: If you fix the interest rate on your reverse mortgage, the charges to break the agreement can be costly.

Is there an alternative to a reverse mortgage?

If you want to access equity in your property, but you don’t want to take out a reverse mortgage, the primary alternative is to sell or downsize your home. However, this will incur substantial costs such as stamp duty, agent and conveyancing fees so it’s a good idea to weigh the benefits and risks involved.

How much does a reverse mortgage cost?

The largest costs associated with a reverse mortgage apart from interest are the application and interest charges.

Establishment fees can be high and interest rates are usually much higher than those set on regular mortgages. Set up costs for a reverse mortgage may vary between $1,500 - $2,000 depending on the lender. This typically covers the lender application fee, government charges, legal charges and any broker fees.

The interest charges will compound with each month, with interest being charged on previous interest amounts that have been capitalised onto the loan. For this reason, it's important to use the right type of calculator that will consider this compounding effect.

To minimise the risk of paying too much interest, you should only borrow what you need. Carefully consider the current value of your house and the amount of equity you intend to borrow from it. Speak to a mortgage broker or financial planner to determine how much the interest charges will be in total.

What questions should I ask my reverse mortgage lender?

Do you have a reverse mortgage product guide?

The lender should be able to provide you with a product information statement that outlines:

• How costs are calculated.
• How interest is charged.
• Features of the reverse mortgage product.
• What to consider before taking out a reverse mortgage.
• What support is available.

What are the financial implications of a reverse mortgage?

The lender should be able to estimate the reverse mortgage calculations for you, which should illustrate:

• The impact a reverse equity loan may have on your personal equity over time.
• The effect of interest rates and house price changes.

What is the cooling off period?

Check the terms of the cooling off period to see what the conditions are if you change your mind.

Life changes

Ask the lender what will happen in the event that you or your spouse passes away. Check to see if you need the lender’s permission to sell, lease or vacate your home or have someone move in with you.

Frequently asked questions (FAQ) about reverse mortgages

• Will I still own my own home if I get a reverse mortgage?

  Yes. Your name is still on the title and you retain ownership of your home.

• Can I stay in my own home for as long as I wish?

  Yes. It's completely up to you when you choose to sell your home or move into a care facility.

• What if I sell my home for less than the reverse mortgage loan amount?

  As of the 18th September 2012 the Government introduced 'negative equity protection', meaning you can't end up owing the lender more than your house is worth. For contracts entered into before this date, there are still options for you. Some lenders out there are willing to extend a 'Negative Equity Guarantee'. This means your loan amount cannot exceed the value of your property, so you won't ever be forced to sell your home. You or your estate also won't be asked to cover any shortfall that may arise in the event that your home is sold for less than the amount owed on your reverse mortgage.

• Can I make sure I still leave my family an inheritance?

  It is possible to choose a 'Protected Equity Option' with some lenders. This lets you preserve a predetermined amount of equity that can't be accessed for future use as inheritance for your beneficiaries. For example, if you want to protect 20% of your equity for inheritance purposes, your lender will calculate the amount you can borrow to protect this amount.

  For example: if your home is worth $500,000, 20% of this amount is $100,000. So the lender will calculate how much you can borrow based on only having $400,000 in equity available.

• How can I ensure my family home remains debt free?

  Before taking out a reverse mortgage, you should ask the lender whether they will accept other assets as security. These may include an investment property or a holiday home which can ensure that your family home remains debt-free.

• Is legal advice mandatory?

  Yes. All lenders require you to obtain independent legal advice so that you understand the risks involved. Once the loan is approved, you’ll need to access the services of a solicitor.

• Are reverse mortgages regulated by the government?

  Yes. Reverse mortgage products are regulated by the Federal government as part of the National Consumer Credit Protection (NCCP).