Reverse Mortgage News | Seniors First Blog

15
Nov

Reverse Mortgage Marketing: The U.S Experience

As many readers may be aware, Reverse Mortgage loans are much more prevalent and established in United States than in Australia. So it can be a useful experience to look to the American market for comparisons and possible future trends that may emerge locally. To that end it’s interesting to see that the veteran actor Tom Selleck (Magnum, P.I. and Blue Blood) recently appeared in a TV commercial promoting reverse mortgages for an American mortgage lender.

Beyond the 71-year-old actor’s credible appeal, his pitch can be effective in convincing the market to use the equity locked in their homes so they can generate cash needed for retirement.

Reverse Mortgage: Too Good to be True?

“It’s not another way for the bank to get your house, and it’s also not too good to be true,” says Selleck in the TV commercial. Many American seniors may agree, but it is always best to apply a critical eye to any celebrity endorsement and instead explore the facts about the product being advertised – in this case reverse mortgages.

Although the U.S product differs in some key respects, through an Australian reverse mortgage you can access a credit line or a lump sum using your home as a security. However, you remain full registered owners of the property (the bank does not take control of your property) and you continue to live in your own home as long as you want. Some people think that this is “too good to be true”, because once they understand how reverse mortgages actually work many Australian seniors do indeed take the view that it’s a lot better than selling your home when you need cash.

The amount that you can borrow will depend on the value of your home, and your age. You can choose to access the fund in lump sum, in regular payments or credit line. And like any other financial products and services, there is fine print to review and below are top critical points you should understand:

  • You still need to pay for property taxes, maintenance cost, and insurance.
  • You may choose not to pay for the loan but the interest will be added to your balance each month, so the interest will compound over time.
  • The loan should be settled first before you can move out or sell the property.
  • The loan should be settled once both you and your spouse have passed away.

FACT: Reverse Mortgage is Not for Everyone

Just because you are already a senior and you own your home doesn’t automatically qualify you to get reverse mortgage.

You are an ideal candidate for a reverse mortgage loan if you have already paid off your mortgages before retirement (or there is a modest amount left owing which can be refinanced by the new reverse mortgage loan), you like where you live (no plans to move out), and you have a genuine need for more money to fund retirement.

You can choose to receive the loan proceeds as a lump sum if you need to finance large purchases to help you with your retirement, while a monthly payment is ideal if you need supplemental cash on top of your pension or superannuation. Meanwhile, if you just need to have a standby fund for emergency expenses, a line of credit (cash reserve) can be ideal.

Remember, reverse mortgage is a big financial decision, so you should do your due diligence first. Tom Selleck might have caught your attention, but be sure to understand this financial offer well. To help you learn more about reverse mortgage, you can download our FREE REVERSE MORTGAGE GUIDE.

You can also call Seniors First Finance at 1300 745 745 or post your comments below.

Regards, Darren

Photo credits: Alan Light, CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=1470255

 

18
Oct

Simply Irreversible

(Article published by Mortgage Professional Australia Issue 16.11)

A combination of economics and demographics is bringing reverse mortgages back into the spotlight, and there’s a need for brokers to write them. MPA, in partnership with Heartland Seniors Finance, explains how you can bring reverse mortgage lending into your business.

DEMOGRAPHIC TRENDS rarely make for a viable business strategy. For instance, we all know that Australia’s population is ageing, but how can you actually cater for older customers with no intention of changing properties? That’s where reverse mortgages come in.

Reverse mortgages – which enable borrowers to release equity in their homes – have been brought back to prominence by an ageing population who want to stay in their homes, and by government policy and economics. By 2030, 3.6 million more Australians will be aged over 65 and thus eligible for reverse mortgages, according to CommBank, which has dubbed these customers ‘Peter Pans’. More immediately, the Coalition Government has already begun making changes to super pension rules, and most obviously, the cash rate is now at a historic low of just 1.5% and annual price growth has risen by 9% in Sydney and 7.2% in Melbourne.

Lenders are seeing the opportunity: the number of reverse mortgage providers has recovered substantially from a low point of five following the GFC.

For one of those lenders, Heartland Seniors Finance, potential reverse mortgage clients will look at brokers. CEO Andrew Ford says “brokers play a key part in mortgages and the mortgage market in Australia…brokers are the most valuable part of our distribution”.

Accordingly, they’re making it easier to get accredited, putting their course and test online in October. Heartland has its own accreditation, while some providers require brokers to complete a course through Senior Australians Equity Release (SEQUAL), the industry association for providers of equity release products.

Reverse mortgages are an area in which advice is essential – indeed, independent legal adviser is mandatory and that’s why consumers want a broker’s assistance, says Darren Moffatt, managing director of Seniors First.

“In some respects it’s a simple product, but it also has lots of implications if handled incorrectly. Seniors like to have someone guiding them through the process, particularly around product selection and lender selection.”

Moffatt, who’s based in Sydney, has been writing reverse mortgages since 2005. He’s seen the sector undergo two rounds of regulation – the NCCP in 2010 and more specific regulation in 2011 – but doesn’t believe it’s made his job much harder.  

“There is more paperwork, but if you were doing the right thing beforehand you wouldn’t find it onerous; certainly we haven’t,” he says.

Like some other brokers, Moffat views increased regulation as an encouraging development. However, Peter Bolitho, director of Reverse Mortgage Finance Solutions on the Sunshine Coast, who’s been working with reverse mortgages for over 20 years, notes there’s “definitely been more regulation, but there are areas of regulation which still cause me some concern”.

Reverse mortgage clients come to Bolitho through referrals from branches, other brokers and increasingly through the company’s website as older people make more use of the internet.

Brokers should take note of who’s making the application, he warns. “My concern is when you have a son or daughter making an application on behalf of their parents, the danger of elder abuse is too great, I think.”

Brokers and lenders need to make sure that the funds will primarily benefit their borrower, but “without face-to-face contact it’s very difficult to establish that”.

Heartland Seniors boss Ford says brokers should feel comfortable writing reverse mortgages. “We’ve got a really robust and thorough fulfilment process which includes independent legal advice and gets the customers to talk to their family – and attest to the fact they have.”

Among other safeguards ‘hard coded’ into the product is the obligation to give the borrower a loan projection using ASIC’s calculator, and to explain alternatives – whether the borrower would be better off downsizing, or borrowing from friends and family – as well as how a reverse mortgage could impact on their pension and inheritance. With oversight from the broker, lender, client’s solicitor and possibly a financial planner, “if there’s something that consumers are uncomfortable with it’s going to be discovered somewhere along the line” says Senior First’s Moffat.

The timeframes involved in reverse mortgage lending can be incredibly diverse. While lenders’ turnaround is typically a couple of weeks – longer if refinancing is involved – the main delay is the client’s decision time: unlike buying a new house, there is no ‘trigger’ for reverse mortgage borrowers, explains Bolitho. There can be triggers – the client running out of money due to a car breakdown, for example – although these are generally preceded by the client researching reverse mortgages as a solution. At Seniors First, Moffat finds the client’s decision-making time is typically six to eight weeks (although his longer client took seven years); Bolitho’s figure is four to six weeks.

Many elements of applying for a reverse mortgage will be familiar to brokers: submitting paperwork, credit approval and receipt of funds. When deciding which product, however, there are a couple of details to watch out for. The interest rate is crucial, given many lenders won’t require any payments and this interest gets compounded. Regular fees should also be watched out for, for the same reason – Moffat says he tries to avoid them – and the LVR may be crucial to the client if they’re looking to get as much money out as possible.

In terms of conditions, there is some differentiation among lenders. Since 2012 the law has stipulated that reverse mortgage borrowers can never owe more than their house worth. At Heartland Seniors they also guarantee clients lifetime occupancy, explains Ford, and allow partial or full repayment at any time without a penalty. Some lenders allow flexibility as to whether they receive the funds as a lump sum, a line of credit or a regular advance as this can have consequences for pension eligibility. ASIC also advises borrowers to check the condition for live-in partners should the sole title-holder pass away.

Although commission rates are similar, the amounts involved in reverse mortgages are typically small – around $90,000 at Heartland Seniors Finance – and this presents a challenge for brokers. Most brokers cover the gap with a fee, explains Bolitho. “I believe that the majority of brokers in this area now charge a fee-for-service, which is discussed with and divulged to the client, because it’s the only way you can maintain a specialisation in this area.” Clients rarely take issue with a fee, he adds. “I’ve had probably one client in the last five years that complained about it. Clients understand that, as long as they’re getting that level of service.”

Reverse mortgages, it should be noted, typically stay on the books for longer and increase as clients draw out extra funds, meaning that over the long term they can form an important part of a broker’s book. Furthermore, for Moffat, writing reverse mortgages is a ‘feel-good experience’.

“You’re actually helping people: these loans have a very significant impact on people’s lives. That aspect of the work shouldn’t be underplayed; it’s why we do what we do.”

There’s another reason: necessity. As Moffat concludes, “this [over 60s] demographic is the fastest-growing part of the population; reverse mortgages provide a great opportunity for brokers to tap that part of the market…over the next 10 years you’re going to see this part of the market grow very rapidly.

 

2
May

Reverse Mortgage Lender Launches ‘Monthly Payments’ Drawdown Option

Breaking news: Reverse Mortgage Lender Launches ‘Monthly Payments’ Drawdown Option.

One of our partner lenders, Heartland Seniors Finance, recently just announced a new product enhancement for reverse mortgages. Heartland now offers monthly regular advances in addition to their regular quarterly and yearly advance options.

This is great news. Now if you are a home owner, you may not need to worry about not having enough monthly income to fund your lifestyle. Based on your preference and need, you can also determine whether you’d want to receive payments over five- or ten-year period for reverse mortgages, while you can have a five-year term for the aged care option.

The monthly regular advances work great for borrowers who need supplemental income to maintain their lifestyle during retirement. This may also be ideal for those who are about to enter a residential aged care. With regular monthly advances, it can be easier & more cost effective to pay a Daily Accommodation Payment (DAP).

Another benefit of regular monthly advances is a substantial interest saving. With a monthly drawdown option, you will only be charged interest gradually as you receive the principal amount each month. The interest you may save over time – compared to drawing a larger lump sum of capital at the outset of the reverse mortgage loan –  can be substantial.

You can use your reverse mortgage for many purposes. In addition to supporting your lifestyle, you can also use your reverse mortgage for debt payments, aged care funding, or home improvements. The possibilities are endless.

To be sure, growing old has its own struggles and fears. But with responsible borrowing it’s possible to unlock wealth from your home with a reverse mortgage and enjoy better cash flow in retirement. Seniors First is a trusted reverse mortgage broker and can help you get started. If you want to know more about our lender products and services, please call 1300 745 745.

Regards, Darren

Disclosure: This comment is made as Seniors First Managing Director, but note Darren Moffatt also provides paid consultancy services to Heartland Seniors Finance from time to time.

4
Feb

Top Five Reasons Why You Should Get Reverse Mortgage Loan this 2016

Majority of Australian seniors are still reluctant to unlock their home equity through reverse mortgage loan.

Recent report from the Productivity Commission reveals that less than 1 per cent of older Australians use financial products to tap into the substantial wealth of their home. The same report also shows that age pensioners tend to be overly frugal and hold on to assets and even build a buffer of savings even into their later years.1

(Related Article: Housing Decisions of Older Australians [Infographic])

Senior finance education advocates such as the Senior Australian Equity Release Association (SEQUAL) are encouraging more Australians to consider equity release as their primary option to supplement their retirement income.2

Even the Productivity Commission itself believe that most older Australian home owners on low incomes could achieve a modest retirement living standard over the remainder of their lives by converting a percentage of their home asset to liquid cash.

So this 2016, why not consider unlocking your home equity? Here are the top five reasons to further convince you.

Top Five Reasons Why You Should Consider Getting a Reverse Mortgage This 2016

1. It Can Improve Your Standard of Living

Once you stop working, your income could be significantly reduced. Relying on pension or superannuation may not be enough to sustain the lifestyle you need. Superannuation were only mandated by the Government in 1993. Hence, if you began working in the 50’s, 60’s, or 70’s, there is less chance that you have accumulated a significant amount.

Many seniors today don’t have enough cash for daily needs, yet they are living in homes that are worth hundreds of thousands and even millions. If you own your home, you can turn a percentage of it to cash, which you can use to make sure that you can live comfortably while in retirement. You can receive it in lump sum, or you can opt to receive monthly cash as additional income.

2. It Can Help the National Economy

The Australian government is now doing precautionary measures to resolve the rising cost of aged care. According to the 2015 Intergenerational Report released by the Commonwealth of Australia, the $42 billion that we are now spending on pensions is expected to grow to $160 billion by 2055. About 80% of seniors today are expected to still receive their pensions four decades from now. This will put a lot of strain on the Australian economy.

The government encourages seniors to unlock their home equities as it will mobilize the idle assets estimated to be worth around $625 billion. The government is still considering to include family homes in assets tests, which could make you ineligible for full pension if you own your home.

The Pension Loans Scheme (PLS) is a form of reverse mortgage that is being offered by the government, which grants 45% of home value. In 2014, the PLS released loans amounting to $31.9 million, which is just a blip in the ocean when you compare it to the $625 billion worth of properties that can be unlocked by senior home owners. In this government plan, you can use your home equity to access cash, but you will lose your right for full aged pension.

This plan could be an attack to pensioners, and we could sugar coat this plan by persuading you that your living standards will improve.

But take time to consider this. You have worked for many years, paid for your mortgage, and accumulated this wealth. You have already earned it, so why don’t you enjoy it? This is a viable solution to take some of the strain of aged care costs.

Today, three out of four Australian seniors own their homes. Unlocking home equities can help the whole country to prevent a huge debt problem decades from now.

3. It Can Help you Pay All Your Debt

Surely, you don’t want to spend your retirement years worrying about high interest debt. However, it is a fact that seniors living on aged pensions are finding it more difficult to sustain standard living and many are using credit cards just to make ends meet.

Many Australian seniors are using their pensions to pay high-interest debt after their retirement. A 2014 report released by SEQUAL shows that about 30% of their clients have used reverse mortgage to pay off their debt.

You can save money on loan repayment while getting peace of mind when you obtain reverse mortgage loan. More often than not, you will not be qualified for an equity credit line or second mortgage if your income is mainly from pension or superannuation.

Obtaining a reverse mortgage will give you access to cash that you can use to pay off all your debt. You can spend your retirement without worrying about repayments, as repayments for reverse mortgage could be voluntary.

(Related Article: End FInancial Worries in Retirement with a Reverse Mortgage)

4. Realize Your Dream Holiday with a Reverse Mortgage Loan

After long years of working hard and building your personal wealth, you have now all the time in the world to do anything you want. Why not realize your dream holiday this year? You can spend weeks in a Caribbean Cruise. Visit your grandchildren in New York. Or finally see the Great Pyramids of Egypt with your friends. Nothing could hold you back, except if you don’t have money to finance your travel and holidays, of course.

Rather than using your pension or spending your personal savings to fund your holidays, you can unlock a percentage of your home equity to access more cash through reverse mortgage loan. Seniors First provides reverse mortgage loan to finance your dream vacation. And with interest rates that are usually much lower compared to personal loans or credit cards, you can save thousands of dollars. So start planning for your grand holiday this year!

5. You Are Protected

Even though reverse mortgage has gained bad press a decade ago, more stringent rules and wider range of product options have made reverse mortgage safe. Today, reverse mortgage has become a legit financial solution for senior Australians.

Once you obtain a reverse mortgage loan, you are protected as you can’t be forced out to move from your home. The government is also now imposing a non-recourse loan contract, which prohibits the lender in touching your other assets in case of default. There is also the no-negative equity guarantee, which means you will not be held liable for a loan that is more than the value of your property. Hence, even if the interest accumulates as you live longer, the lender will not charge you for more than the worth of your house.

Next Steps

Make 2016 the day you gain freedom from your financial woes and live the life you want through the help of reverse mortgage. If you want to learn about reverse mortgage in detail, you can download our guide, Reverse Mortgage Secrets. This FREE special consumer report will help you learn more about reverse mortgage and how you can enjoy your home equity safely and save thousands.

You can also call Seniors First Finance at 1300 745 745 or post your comments below.

References:

1Productivity Commission 2015, Housing Decisions of Older Australians, Commission Research Paper, Canberra.

http://www.pc.gov.au/research/completed/housing-decisions-older-australians/housing-decisions-older-australians.pdf

2Senior Australian Equity Release Association (SEQUAL) http://www.sequal.com.au/who-is-sequal

2
Feb

Housing Decisions of Older Australians [Infographic]

For older Australians living on pension, maintaining a modest life could be a challenge. Your income in your retirement years will not be enough to pay for all your needs, so you might resort to cost-cutting and even debt just to make ends meet.

Chances are, you have accumulated your wealth in form of home equity once you have fully paid your mortgage. But with reduced income, you might end up assets rich, yet cash poor.

In December 2015, the Productivity Commission released a report that shows 83% of older Australians prefer to live in their own home while 73 per cent actually did. However, less than 1% of older Australians use financial products to tap into the substantial wealth of their home.

Check out the infographic above from Seniors First Finance to learn why older Australians are still not tapping financial products and how a reverse mortgage loan can help you pay for your retirement needs.

 

4
Nov

Reverse Mortgage Lenders Market Update

Recently Seniors First Managing Director, Darren Moffatt, conducted a media interview on the current state of the local reverse mortgage market. This was in response to a recent report by Deloitte which now has the value of the reverse mortgages in Australia at $3.7 billion.

To find out what’s happening with reverse mortgage lenders, and how this is creating positive opportunities for seniors who want to release equity from their property to fund retirement, watch the video above.

24
Aug

End financial worries in retirement with a reverse mortgage?

Are you worried about your retirement? Perhaps you are concerned your savings will not be enough to cover your lifestyle when you retire. Is a reverse mortgage the solution for you?

I was recently quoted in a very extensive article by the Financial Review on reverse mortgages, which I recommend you read in full. It’s fair to say that although there was some bad press about reverse mortgage a decade ago, tighter rules and more product options have made reverse mortgage finance very safe & increasingly popular among Australian retirees. Today, the stigma that was once attached to reverse mortgages has all but disappeared and it is considered as a legitimate option for funding one’s retirement.  

Around seven million people are expected to begin living off through their savings in the next 40 years. Most of these savings are in the form of superannuation. There is nothing wrong with that, but the challenge comes when we start to talk about how can we make your super last, especially during times of volatile investment markets and low yield. If you are retired or coming up to retirement age, it is important that you are aware of the options available to you, and the pros and cons of each. 

Unlocking the equity in your home

The increasing need for viable ways to fund retirement has prompted financial institutions to offer equity release products such as reverse mortgages and home reversion products. Because of recent data statistics that show increase in longevity and number of retirees in Australia, property and investments have been receiving lot of interest as a way to fill the gap. Though selling the home is the most popular way to release equity in your home, there are products like reverse mortgage and home reversion that are worth considering.

How does reverse mortgage work?

Through a reverse mortgage, you can borrow money using your home as a collateral. You have an option to take the loan as a lump sum, a line of credit, a regular income stream, or combination of these options. One of the advantages of a reverse mortgage is it doesn’t require a specific income to qualify, unlike other loans. You also don’t need to make repayments while you are still living in your home. You can stay at your home for as long as you want and the only downside is that interest compounds over time. The loan must be paid in full once you sell your home, move to an aged care, or when you die.

What are the risks?

The question whether a reverse mortgage is safe is one of the most common question we receive from clients. With increased scrutiny from government, since 2011 regulations that protect consumers are now tighter for reverse mortgages. There are also bank-imposed limits on how much you can borrow against the home value. The government also imposed a ‘non-recourse loan contract’, which means the lender cannot touch your other assets in the event of default. All reverse mortgage lenders are required by law to provide a ‘no negative equity guarantee’, which means you can never be liable for a debt more than the value of your home. That means that even if the interest accumulates as you live longer, the lender cannot charge you more than your house is worth.

How about home reversion product?

A home reversion product allows you to sell a portion of your home at a discount, in exchange for a cash payment & continued residency in the house. By doing this, you can continue to live in your home and be a co-owner for the rest of your life. You will receive a lump sum and although there is no accumulating ‘debt’ to worry about, although you will generally receive a lesser percentage of the future sale value, the longer you live. It is also does not usually offer any flexibility in how you access the funds, and large lump sums may adversely affect aged pension entitlements. Nevertheless, a home reversion product can be a good way to extinguish significant remaining home loan debt upon retirement, that you could only otherwise clear through a property sale. 

Should you consider a reverse mortgage?

Just like other loans, there are some things you need to consider before you decide to take out a reverse mortgage. Below are some points you need to know and decide on before applying for a reverse mortgage:

  • Make sure you can live with less equity in your home over the long-term, and possibly less wealth for your children when you pass away or the property is eventually sold.
  • There’s a price to pay—an application fee and interest rates that are usually one to two percentage points higher than regular home loans.
  • Interest adds up over time and the equity in your home decreases as the balance of the loan increases.
  • Some lenders require that the loan has to be repaid once you move out of the house, e.g. entering residential aged care. At this point, you have to think who else is living in the house before you can consider an eventual sale.
  • You must be at least 60 years old to access a reverse mortgage. Some reverse mortgage lenders require that you are 70. Your loan amount will depend on the value of your property and your age. The older you are, the more money you can borrow.

Use our reverse mortgage calculator to see understand the long term costs and interest calculations of reverse mortgages.

Where can I use my reverse mortgage?

According to the industry body SEQUAL the average loan amount of a reverse mortgage is around $85,000. If you are old, unemployed, and have little source of income, there are many things you can use it for. Below are the common uses of a reverse mortgage:

  • Additional source of income – Losing a job has a large impact on your cash flow. If you can’t rely on savings alone, reverse mortgage can come to the rescue.
  • Paying for debts – Lessen your worries by paying your existing loans with the money you get from reverse mortgage.
  • Fund your aged care – Entering a residential aged care can be costly. You can use reverse mortgage to fund your RAD (Refundable Accommodation Deposit).
  • For home improvements – You can effectively use the money for the renovation or improvements you have been planning for your home.
  • For lifestyle purposes – Most reverse mortgage loans by young and active retirees are used for lifestyle purposes like buying a new car or traveling.

Where will I go to get a reverse mortgage?

There are a small but growing number of existing reverse mortgage product providers in Australia. Seniors First is a long-time reverse mortgage broker and although we have seen the competition becoming better compared to recent years, there is still more to expect in the equity release market.

Each year, more than 200,000 people turn 65 with an average superannuation of $85,000. A product like reverse mortgage is an attractive retirement funding solution for many retirees.

Will it affect my age pension?

Reverse mortgage is flexible. Payments can either be a regular income stream, a lump sum, a line of credit, or combination of these options. In most cases, although there is no direct impact on the age pension, you still need to be careful. This is for in such cases as taking lump sums and using them for non-exempt assets like taking a holiday or general expenses.

High amounts of payments count as an asset immediately, while any lump sum amounting to $40,000 is not counted for the first 90 days. If you are a single person and a home owner, you can have as much as $200,000 in assessable assets before assets test affects your pension.

In case you use the money for investment, it may be subject to deeming right away. This may affect the pension through income test. But once you use your money for exempt asset, this may not have any impact on your aged pension.

Do I need a reverse mortgage broker?

A reverse mortgage broker helps you access to more lender choice and compare different lenders. A broker will help you find the right loan product, at a good rate. He or she can also give you tips to save money by showing you ways to structure and manage your reverse mortgage fund to minimise interest costs and effectively preserve your home equity. A broker will do all the hard work for you and manage your application from start to finish so you can have a hassle free reverse mortgage loan.

Seniors First’s brokers have full accreditation with panel lenders and successfully completed SEQUAL industry course, Equity Release Plans. They have extensive life experience, empathy, and understanding of your needs. For more information, call us now at 1300 745 745.

Regards, Darren

NOTE: this post is for informational purposes only and does not constitute legal or financial advice. Please also note that the figures contained are correct at time of publication, but may not be accurate in future. For possible reverse mortgage impacts on aged pension you should check with the Centrelink Financial Information Services (FIS). 

26
May

Reverse mortgages: a gift for Australia’s ageing population?

Reverse mortgages have been every where in the media recently. Suddenly it seems that releasing home equity is THE solution for seniors facing lower pensions and possibly higher superannuation taxes, from a government under fiscal pressure. There was a great article published recently about this phenomenon. Even the Financial System Inquiry strongly suggests reverse mortgages as a way to support retirees’ cost of living and increase the activity of Australia’s overall financial system.

If you haven’t heard, reverse mortgage is a kind of home loan which allows you to draw money from your home equity. Unlike a regular home loan, reverse mortgage allows you to defer payment until you die, move out, or sell your home. For many Australians whose wealth is tied up to their home, reverse mortgage is a great way to tap home equity for extra funds that can be used for travel, aged care accommodations, or investment.

Since the outbreak of the global financial crisis, there has been an increase in lending and mortgage transactions by Australian banks. Today, these banks hold around $1.3 trillion in mortgages and continue to increase by the minute.

How can reverse mortgage help you?

Through reverse mortgage, you can access a lump sum or an annuity using your home as a collateral. One of the main benefits of reverse mortgage is that it allows you to still live in your house as long as you live or as long as you still hold ownership of the house. As opposed to selling your home when you need fund, reverse mortgage protects you from possible heartache of letting go of your home. Reverse mortgage can be paid through eventual sale of your house after death.

Effectively, you can use reverse mortgage for general living expenses to supplement your aged pension or super (or to fund your aged care accommodation costs).

What’s the difference between reverse mortgage and standard mortgage?

A reverse mortgage has the following qualities:

  • Increases overtime – the loan balance increases as interest is added to the outstanding balance, unlike standard mortgage that decreases as you make repayments.
  • It is protected by ‘no negative equity guarantee’ – despite the compounding interest your debt payable under reverse mortgage cannot exceed the value of your home.
  • Higher interest rates – reverse mortgages generally have slightly higher interest rates because there is lesser competition in this sector, unlike standard mortgages. Also the lender may not receive any capital back for decades, so a slight premium on the rate applies. 
  • Lenders only provide up to 45% of property value, depending on your age – this is because of longevity risk and to allow a buffer for the possible long-term effect of compounding interest.

Why choose reverse mortgage?

In Australia, the government has legislated a no-negative-equity guarantee as a minimum requirement for all reverse mortgage providers. The government does that to protect borrowers and generally support the market’s efficiency. We are lucky because here in Australia because the market is heavily regulated with generally very good outcomes for senior borrowers.

With a responsible, regulated reverse mortgage industry Australian seniors at least have a viable solution to fund the increased longevity of an ageing population. This is important for pensioners and superannuants who are facing increasing pressures from government to fend for themselves, financially.

What do you think? Are reverse mortgages a gift for Australia’s ageing population?

Regards, Darren

17
Mar

SEQUAL sees a better retirement with Reverse Mortgage

“Today we are announcing a new mission statement that is really all about the consumer,” SEQUAL chairman Mr John Thomas said in a media release following the launch of SEQUAL’s new website. SEQUAL’s new mission statement promises a dignified and secure retirement for all Australian home owners.

The Senior Australian Equity Release Association (SEQUAL) has recently made major changes to encourage more Australians to consider equity release as their primary option to supplement their retirement income. According to Mr Thomas, one of SEQUAL’s goals is to “advocate a dignified and secure retirement for all Australian home owners.” He added that having equity release as their option should mean that they no longer need to experience financial hardship in their retirement or lose their home in the process.

The recent changes have sparked interest in many Australians. Now, more people are looking into equity release and gathering more information about their options. Since the launch of the website a month ago, SEQUAL said they already experienced substantial growth in terms of people visiting the site and running to SEQUAL for more information.

To serve the needs of Australian seniors better, SEQUAL has come up with a new mission statement:

  • Advocate a dignified and secure retirement for all Australian home owners
  • Promote an understanding of senior’s equity release to consumers and other stakeholders
  • Ensure members adhere to SEQUAl’s “Consumer Protection Principles” to foster consumer confidence

Providers who wear the SEQUAL badge offer consumers guarantee of security and certainty with their products. All equity release customers of SEQUAL members are guaranteed to stay at their house for as long as they live, without any threat of losing their home any sooner. Regardless of what happens to interest rate or market prices, your house is secured with any SEQUAL member. This is because of the No Negative Equity Guarantee, which is a prerequisite to SEQUAL membership. This means you cannot owe more than what your house is worth.

In the days to come, SEQUAL is expected to further increase awareness and educate people about equity release. They are standing firm in their goal to give every Australian home owner a dignified and secure retirement.

For more information about SEQUAL and its members, please visit www.sequal.com.au.

Regards, Darren

PS: SeniorsFirst only use SEQUAL accredited lenders for reverse mortgage.

30
Jan

Government Blow To Seniors’ Finances: NICRI To Close

In what may well rank as the worst in a series of stupid recent decisions, this federal government has cut funding to the National Information Centre on Retirement Investments Inc (NICRI). Consequently NICRI will close on late Feb 2015.

I am frankly appalled at this decision. Wendy Schilg and team at NICRI have done much good work over the years for retirees in general, and also for many Seniors First customers. I think the closure of NICRI is a serious blow for seniors finances, and it seems both COTA and TARS agree. 

NICRI is an important source of ‘independent’ information for seniors  on superannuation, retirement investments, financial advice, financial planners, estate planning, equity release finance and more.

I and the team at Seniors First have regularly referred pensioners & retirees who were considering home equity release to NICRI. This service was especially useful for would-be borrowers who were nervous and wanted reassurance that reverse mortgages were safe, and indeed were regulated by government.

The foolhardy policy decision by the government to cease funding this body will almost certainly result in some retirees making poor financial decisions that could otherwise have been avoided.

Regards, Darren