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A reverse mortgage is a way for older home owners to access wealth tied up in their homes. Before taking out a reverse mortgage you need to be aware that, while perfectly legal and regulated, these mortgages are not like other home loans. Reverse mortgages have higher interest rates and if you borrow too much or your property loses value you may find yourself without funds or equity to cover your retirement.
On this page you can compare reverse mortgages from specialist lenders and learn more about these products.
Here are the basic facts on reverse mortgages:
A reverse mortgage lets you unlock some of the wealth in your home now so that you can spend it to cover costs and fund part of your retirement. The key thing you need to understand is that you ultimately need to repay the debt by selling your property.
When this happens, a substantial amount of the property's value will go to the lender (depending on the interest charges and how much you borrowed). If you don't do the maths correctly you could find yourself short on cash towards the very end of your life.
And if you're planning to leave your property to your children, understand that taking out a reverse mortgage could substantially reduce their inheritance.
Equity is the value of a property you own, minus any mortgage debt. A reverse mortgage lets borrowers from the age of 60 convert this equity into cash.
The amount of equity that can be released is determined by your age and the value 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.
You don't have to make ongoing repayments with this type of product. Instead, the interest payments are added onto the loan balance each month.
You repay your reverse mortgage debt when:
The loan amount can be taken as one of the following, or a combination of the following:
Most lenders let you borrow between 15 and 45% of a property's value. And the older you are, the more you can borrow.
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. This ensures the value of your home will be enough to repay your loan in full, plus interest.
Some lenders have specific borrowing amounts depending on your age. Here's an example.
Age of Borrower | Percentage of Property Value Available |
---|---|
60 | 15% |
65 | 20% |
70 | 25% |
75 | 30% |
80 | 35.5% |
85+ | 45% |
To use the calculator, enter the following details:
Reverse mortgages are 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:
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.
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.
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The reverse mortgage calculator is quite useful. However, I want to make a repayment each month or fortnight. Is there an enhanced version of the calculator that provides for repayments of interest at least, maybe more?
Hi Neil,
Thank you for getting in touch with Finder.
We appreciate your feedback on this page. I have forwarded your feedback to the team who’s on it and they’d look into this. Please note that when it comes to repayment and calculation of interest varies per lender.
I hope this helps.
Thank you and have a wonderful day!
Cheers,
Jeni
I am 73 years old my wife is 55 we own our house can we reverse mortgage 100,000 our house value 1,000,000
Hi John,
Thank you for visiting Finder.
For this particular concern, it would be best that you reach out mortgage broker that way you will get expert advice and get specialised answers to your questions.
Cheers,
Joanne
My husband and I are considering a reverse mortgage for home renovations he is 69 and I’m 68 which lenders supply these loans and what fees and interest would we incur we own our home
Hi Sharon,
Thank you for your inquiry.
As per checking you are already in the correct page. Please use the table provided above to review and compare the available options for you.
I hope this information has helped.
Cheers,
Harold
Please send me regular newsletter of finder.com.au
Hi Wansoon,
Thanks for reaching out.
Please feel free to sign up to our finder.com.au newsletter to stay updated with our latest content.
Cheers,
Anndy
Hi C Saum,
Thanks for your question.
Please note that finder.com.au is an Australian comparison and information service. We only compare products and give general information relevant to Australia.
You’ll need to speak to the Secretary of Housing and Urban Development in the USA directly regarding this enquiry.
Cheers,
Shirley