Reverse Mortgage Commentary


Government to Reverse Retirement Age Pension Policy?

Prime Minister Scott Morrison announced today that he will quickly scrap the Government’s plan to increase the retirement age pension to 70. “We will ratify it next week. The pension age going to 70, gone,” Morrison said in an interview with Today Show.

In the 2015 Budget, the Coalition decided to gradually increase the qualifying age for pension to 70. However, the new PM said that the last Budget comes with many measures that can help Australians live “a longer, healthy and more active life.”

Positive News for Australian Seniors

At Seniors First, we view this news as a positive one, because we believe Australian seniors should receive their entitlements as soon as they reach 65. But it is important to note that the pension age has already started going up from 65 years and Australians who are turning 66 in the first half of 2019 will have to wait to July in order to qualify.

[Related Post: Changes in Pension to Boost Interest in Reverse Mortgages ]

Many Australians will depend on the age pension as their primary source of income once they retire. Even those who have saved money in their super are looking forward to receiving their entitlements to cope with the costs of living.

Strain on Government Finances

The move to raise the pension age to 70 was called a “sensible plan” as it will avoid too much strain on government finances.

In a report published in 2014 by the National Commission of Audit (under the Abbott government) revealed that without policy change, the cost to taxpayers of the age pension would rise from $39.5 billion in 2013-14 to $72.3 billion in 2023-24.   

The report also projects that by year 2055, the number of Australian seniors over 65 years old would increase to 8.9 million, which would represent about 1 in 5 of the expected population.

As of this writing, there is no clear plan from the current government on how it could ensure a sustainable age pension system that would provide a safety net for Australian seniors in the future.

Reverse Mortgage – Alternative Solution

There is still no certainty if the current government plan to scrap the move to increase age pension will really push through, and there is no guarantee that the Australian pension system will sustain your needs when you reach retirement. That is why it is ideal to look for alternative solutions to make sure you can live a comfortable life when you stop working.

One viable solution is to unlock your home equity through a Reverse Mortgage loan.

If you are already 60 years old, you own your own home, and you are in need of cash for your retirement needs, you can choose to convert the equity of your own home and transform it into either income stream or lump sum.

A Reverse Mortgage loan is often recommended for retirees who have already paid off their mortgages and require money for their expenses such as home renovation, aged care accommodation, debt consolidation, and more.

[Related Post: Reverse Mortgages in Australia, Seniors First Video ]

But take note that this product is not for everyone. Only those retirees who are willing to decrease the proceeds from the sale of their property by the loan amount plus interest charges are ideal candidates. These are usually retirees who want to stay in their homes until they pass away.

If you want to learn more about how Reverse Mortgages work, you can download our FREE REVERSE MORTGAGE GUIDE.

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




Reverse Mortgage Loans in 2018 Australia

Although it is just a bit more than halfway through 2018, we can already say that this year is a big one for the Reverse Mortgage industry. With tighter government regulation, expansion of Pension Loan Scheme (PLS), and the growing market demand, the Reverse Mortgage niche is still a vibrant and stable industry.

Government Reverse Mortgage Review

In late 2017, the Australian Securities and Investments Commission (ASIC) has conducted a surveillance exercise on Reverse Mortgages to test the compliance with responsible lending obligations, measure consumer understanding of the products, borrowing experiences and outcomes.

Aside from scrutinizing Reverse Mortgages, ASIC is also monitoring the provision of financial advice to the elderly.

This only proves that Reverse Mortgages are one of the most heavily regulated financial product in Australia, which is crucial to protect the interest of our customers.

Government Reverse Mortgage Expansion

While the Australian government tightens the regulation on private Reverse Mortgage providers it is now expanding its own equity product for Australian seniors with full age pension entitlements.

As part of the 2018 Federal Budget, eligible seniors can access the government funded Pension Loans Scheme at a max of $17,800 annually starting 1 July 2019 if legislation passes.

The Australian Government has been offering the Pension Loans Scheme through the Centrelink as a voluntary reverse equity mortgage for older Australians who need to supplement their retirement income.

[ Related Post: Pension Loans Scheme Extension Benefits Age Pensioners But Still Limited ]

At Seniors First, we see this government program as a validation of our efforts to promote Reverse Mortgage as a way for senior Australians to live a better retirement. The recent expansion further attests to the benefits of unlocking home equity to fund needs during retirement age.

Current Private Reverse Mortgage Lenders

As of press time, the following companies are offering Reverse Mortgage products in Australia:

  • Bankwest (Seniors Equity Release)
  • Commonwealth Bank (Equity Unlock Loan)
  • Heartland Seniors Finance (Reverse Mortgage)
  • P&N Bank (Easy Living Access Loan)
  • IMB Bank (Reverse Mortgage)

As a leading Reverse Mortgage broker, Seniors First works with many of the providers mentioned above.

Some Banks Withdrew Their Reverse Mortgage Products

Despite the growing demand for Reverse Mortgage loans in Australia, some lenders decided to drop their home equity products.

Macquarie and St. George both withdrew their Reverse Mortgage loan product in 2017.

St. George announced last year that Westpac (owner of St. George bank) reviewed their suite of home loans to simplify their systems and increase productivity in operations.

[ Related Post: St. George Reverse Mortgage No Longer Available ]

Aside from the withdrawal of Reverse Mortgage and equity release loan products, St. George also discontinued its equity access low documentation loans and some fixed rate low documentation home loans. 

(It is important to take note that this move from Westpac does not only affect Reverse Mortgage products. The bank also discontinued or repackaged other financial products such as insurance and home loans as the bank tries to adjust its lending criteria to changing market conditions).

Growing Market Demand

While some lenders have dropped their Reverse Mortgage offerings, the need by seniors Australians for home equity release products still persists and is in fact growing.

Australians are becoming more aware of Reverse Mortgage, and they usually turn online to learn more about this financial product.

According to Google Australia search traffic, the keyword “Reverse Mortgage” has around 2900 monthly search volume.

Meanwhile, the keywords “Reverse Mortgage loan” and “Reverse Mortgage calculator” has 590 and 390 monthly search volumes respectively.

Popular keywords also include ANZ Reverse Mortgage, NAB Reverse Mortgage, and Reverse Mortgage westpac.

People also search for Bendigo bank Reverse Mortgage but in fact, this refers to the Homesafe equity release product that is typically available in Sydney and Melbourne.

Ask Me About Reverse Mortgages

Just like other financial industry in Australia – banking, insurance, property loans – Reverse Mortgage is undergoing some change. Most of these changes are positive, and given that Reverse Mortgages have been offered since 1992, the market is now quite mature.

If you are interested to learn more about Reverse Mortgages, you can reach me at 1300 745 745 or you can post your comments below.




Pension Loans Scheme Extension Benefits Age Pensioners But Still Limited

I was recently quoted in an opinion piece written by Bina Brown and published by the Australian Financial Review. Entitled “How to use the budget pension loan scheme for aged care help”, the article explores the idea of unlocking the family home as the “fourth pillar” of the retirement income system.

The decision of the government to extend the Pension Loans Scheme (PLS) to include all eligible retirees can be perceived as a validation of our efforts in the private sector to promote reverse mortgage as a sound way for Australian seniors to live a better retirement.

[ Related Post: Pension Loans Scheme: Government Reverse Mortgage to be Expanded ]

Through a reverse mortgage, also known as a home equity loan, eligible seniors can unlock the wealth of their home without the need to sell the property. The loan proceeds can be used to improve the standard of living during retirement.

Despite Extension, the Pension Loans Scheme Is Still Limited

In the article, I expressed my belief that the PLS extension will be of greatest benefit to full pensioners with no other options to increase their income. However, it is also a fact that the scope of this “government reverse mortgage” is limited because it doesn’t offer a lump-sum option.

The PLS can only be taken as an income stream that is added to the borrower’s pension. In comparison, a reverse mortgage loan from Seniors First can be accessed in three ways:

  • a lump sum
  • a regular income stream
  • cash reserve
  • or a combination of all

With my experience in helping senior borrowers unlock home equity through reverse mortgages, most people want only a small to a medium lump sum, often with further access to a standby fund to mitigate longevity risk. At Seniors First, the average loan we originate is around $85,000, and the loan proceeds are often used for debt consolidation, home improvements, and aged care financing.

[Related Post: Changes in Pension to Boost Interest in Reverse Mortgages ]

PLS is fairly limited because it will not help Australian seniors who need a sizeable lump sum needed for residential aged care in form of the Refundable Accommodation Deposit (RAD). The RAD is an upfront lump sum payment to the aged care home, which may average between $300,000 to $400,000. However, the income stream for PLS can be used to settle the Daily Accommodation Payment (DAP) that is another option to move into aged care.

While the extension of the PLS is commendable, it is not for everyone. If you need a lump sum amount to pay for aged care and other needs during retirement, a reverse mortgage is another option available.

It is important to take note that the changes in the PLS will start on 1 July 2019, if legislation passes.

To help you learn more about reverse mortgages, you can download our FREE REVERSE MORTGAGE GUIDE. You can also call Seniors First Finance at 1300 745 745 or post your comments below.




The advantage of taking a reverse mortgage now

Since it was introduced a decade ago, reverse mortgage has received a lot of expectation. People who were approaching retirement saw reverse mortgage as an additional retirement funding option, but still, the interest in the product was low because of high interest rates.

With a home loan, you take a lump sum loan and repay in installments. In the case of reverse mortgage, you take the loan in installments and repay the lump sum later. Interest rates of reverse mortgage are usually higher though. Because even though lenders receive payments later, they already need to pay tax on the accrued interest of the loan. This increases costs on part of the lender.

The lenders can only recover the loan after the borrower moves out the house, sells the house, or dies. This postpones the recovery of the loan and adds risk to the lenders. This is usually accounted in the amount you can borrow.

On the positive side, borrowers’ protection like No Negative Equity Guarantee (NNEG) assures borrowers that they cannot owe more than the value of the property. The fall in the interest rates also makes the product more appealing than ever. Reverse mortgage makes more sense in economies where interest rates are low.

Interest rates usually go up along with inflation. Taking advantage of lower interest rates now will give you interest savings on your reverse mortgage. You can take a reverse mortgage now and take it as a line of credit where you can draw money as you need. Some like to call it as a “standby reverse mortgage.”

Shall you go for a reverse mortgage now? The answer largely depends on your circumstances. If you are like most baby boomers that are asset-rich but cash-poor, a reverse mortgage can help you sustain your lifestyle and live a comfortable life throughout retirement.

If you want to know more about reverse mortgages, please don’t hesitate to contact us at 1300 745 745.


ASIC Mortgage Broker Review [Infographic]

The Australian Securities & Investments Commission (ASIC) recently released an infographic to explain the regulator’s review of the mortgage broking market and understand the effect of current remuneration structures on the quality of consumer outcomes.

The review reveals that mortgage brokers are paid an average of 0.54% or $2,700 for a $500K home loan.

It also claims that when taking out a loan, customers who use mortgage brokers tend to borrow more, have lower property values, have higher loan to valuation ratios, spend more of their wage on the mortgage, take out more interest only loans, and get the same rate as direct customers.

It is interesting to take note that this review is based on home loans and not reverse mortgages. And at Seniors First, we believe that you can take advantage of great benefits when you choose to work with a reverse mortgage broker.

In fact, we have specified below the top four reasons why you should work with a broker when you are looking around for a reverse mortgage.

1. More Options to Choose From

A reverse mortgage broker like Seniors First works with the top providers of home equity loans, and our specialisation in providing this specific financial product allows us to offer you with more choices. Working with a reverse mortgage broker will allow you to explore more choices from various lenders.

2. Professional Advice

A simple online search will provide you with the top providers of reverse mortgage near your area. But with a professional broker to guide you, it will be easier to choose and apply for a loan package you need without going through the usual hassle. Reverse mortgage brokers have already established a good working relationship with home equity lenders, so they know the complexities of the process so you can be sure of a favourable result.

3. Save Valuable Time


A reverse mortgage loan is different than the usual home loan. Hence, you might need to spend some time studying its unique rules and terms before you finally decide to avail of an offer. You can save a lot of time if you work with a reverse mortgage broker who will explain to you the intricacies of the available products. On top of that, your broker will also take charge of filing your application and will regularly update you on the status of the loan.

4. Save Money

The ASIC review also noted that those who took home loans through brokers made 16% less additional payments. This is possible because brokers will always try to find you the lowest rates and fees so you can save more dollars.

For more information on how a reverse mortgage broker can help you with your home equity loan, you can call Seniors First on 1300 745 745 or send as an inquiry to



St. George Reverse Mortgage No Longer Available

St George has announced it is dropping mortgage and equity-release products after Westpac made a high-level review of their product range and underwriting standards. The review is set to reexamine loans and lending packages under current market conditions. Consequently the St George Reverse Mortgage product has been removed from sale.

The review came at a time when the other four major banks continue to increase the required deposit for home loans and apply strict requirements for interest-only loans and other credit-related products.

In a confidential memo sent to mortgage brokers, St George said that Westpac (owner of St George bank) reviewed their suite of home loans to simplify their systems and increase productivity in operations.

Aside from withdrawal of equity release products such as their reverse mortgage product, the Senior’s Access Loan, St George is also dumping equity access low documentation loans and some fixed rate low documentation home loans.

Equity access low documentation loan is a revolving line of credit secured against the borrower’s property. A low documentation loan is perfect for those who are self-employed who cannot provide usual loan requirements such as tax returns and other financial statements.

Lenders in general face new challenges as new record levels of household debt arise versus static income. An independent analysis suggests lenders to review their underwriting standards in order to deal with changing market conditions.

Are Reverse Mortgage Loans Still Available from Seniors First?

Yes. There is no need to worry about this news. If you are over 60 years and you need to release home equity, a reverse mortgage loan from Seniors First is still a great option. As a leading reverse mortgage broker, we work with some of the biggest names in home finance such as IMB Bank, Bankwest, and Heartland so we can provide you with enough options to find the equity release solution you need.

You should also note that this recent move from Westpac does not only isolate reverse mortgage products for cancellation. The bank is also reassessing other lending packages such as insurance and credit products, as the bank tries to adjust its lending criteria to changing market conditions.

Westpac might ditch their reverse mortgage loan packages, but the need by senior Australians for great equity products still persists and in fact growing.

Many of our reverse mortgage borrowers use their equity fund retirement living, refinance their debt, renovate their homes, buy a more practical vehicle, or take a holiday after years of hard work.

To help you learn more about reverse mortgages, you can download our FREE REVERSE MORTGAGE GUIDE.

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




Why Reverse Mortgage Is Not for Everyone?

Reverse Mortgages have been available in Australia since the 1990s, but it is only in the recent years that these are becoming popular as a viable financial product for homeowners. Even though reverse mortgages, also known as home equity loan, has drew some flak from the media because of inherent drawbacks, public demand has been increasing because it can really help seniors who are assets rich but cash poor.


But despite of its viability, a home equity loan is not always recommended for everyone. In fact there are certain circumstances where a reverse mortgage can be detrimental to one’s finances. This blogpost will help you explore the proper use of a home equity loan and know whether it is a good idea to get one.

What is a Reverse Mortgage?

Reverse mortgages will allow you to unlock the equity in your home without the need to worry about regular repayments. You can receive the proceeds in either a lump sum, a monthly income, a line of credit, or a combination. This is usually a recommended product for retirees who have already paid off their mortgages and need cash for their expenses such as aged care, debt consolidation, home renovation, and more.

[Related Post: Reverse Mortgages in Australia, Seniors First Video ]

When Is It A Good Idea to take a Home Equity Loan?

Those who are qualified for a reverse mortgage can take advantage of the following:

  • Access to cash for your needs
  • Tax-free funds with no limits on where you spend the money
  • Flexible repayment scheme
  • No income qualifications

But despite of these benefits, stricter regulations in Australia requires lenders and brokers to be more responsible in offering reverse mortgages. Hence, not everyone can just take this loan.

In general, retirees who are willing to decrease the proceeds from the sale of their property by the loan amount plus interest charges are ideal candidates. These are usually retirees who want to stay in their homes until they pass away. Retirees who are also looking to decrease their taxable estates may also be ideal candidates for reverse mortgages.

Reverse Mortgage Risks

The following are the risks usually associated with reverse mortgages:

  • Interest rates are higher compared to the traditional home loans
  • The total debt may quickly rise when you choose a no-regular repayment scheme as the interest may compound over time (You can use our reverse mortgage calculator to know how much money you will owe over a certain period )
  • Your heirs will receive less proceeds from the value of your property
  • Taking a reverse mortgage may affect your eligibility for pension

Most reverse mortgages also require homeowners to maintain the property in good condition for the duration of the loan. This can be challenging for retirees who have health problems, and paying for maintaining the property can be luxury for some. Therefore, you should always consider this factor and clarify this requirement before making any decision.

If you like to pass your home to your heirs, you should also carefully consider the fine print of reverse mortgages. Thanks to the ‘negative equity protection’ rule, you cannot end up owing the lender more than the value of our home. However, the property may still be repossessed if the balances exceed the value of the home. Your heirs may need to pay the balance before they can re-acquire the property.

Reverse Mortgages Can Help the Right Individual

A reverse mortgage can provide significant benefits for the right person, but you should always consider all the risks and clarify the fine print before taking this type of loan. This is the reason why we highly recommend working with a financial advisor who specialises in home equity loans so you can gain a comprehensive perspective of how reverse mortgages can affect your finances, especially during retirement.

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.




How Reverse Mortgages Help the Australian Economy

How Reverse Mortgages Help the Australian Economy

The Australian government is now implementing long-term precautionary measures to respond to the rising cost of aged care. Based on the Intergenerational Report released by the Commonwealth of Australia in 2015, the $42 billion that the government pays for pensions is projected to grow to $160 billion by 2055. This will surely put a lot of strain on our economy because about 80% of seniors today are still expected to receive pensions four decades from now.

KPMG also noted that this situation may place a significant pressure on the Australian workforce as the number of working taxpayers for every elderly person will decrease from 4.5 to 2.73. And by 2055, our expenditure for aged care will increase from 0.9% to 1.7% of GDP. With such scenario, there is a high chance that we will see increased taxes and pension cuts in the future.

Australian Aged Pension May Not Be Enough

It is clear that the aged care system in Australia is not sustainable, and it will continue to do so if our retirees will completely depend on our pension system. In fact, the average pension received by seniors may never be enough to fund a comfortable retirement. A report released by OECD reveals that one-third of Australian pensioners are living below the poverty line.

[ Related Post: Top Five Reasons Why You Should Get Reverse Mortgage Loan this 2016 ]

With insufficient pension, limited income, and increased expenses, retirees may need resort to selling their properties such as family homes to cover the cost of aged care. Some retirees may need to face debt, and families may have to shoulder some of the expenses, which may put significant strain on their finances.

Home Reverse Mortgage Can Help You and the Economy

Many seniors wish to stay and received aged care at home, where they can spend their retirement with their loved ones. Hence, the prospect of selling the home and move into an aged care facility is usually not an option for many. This is among the many reasons why reverse mortgages, also known as home equity loans, are becoming popular options.

A reverse mortgage is a type of loan designed for retirees and pensioners and quite beneficial for those who are assets rich but income poor. Seniors First offers this financial product that will allow people from age 60 to unlock the equity of their homes to fund their needs such as aged care, debt consolidation, home renovation, and many more. Just like any other type of loan, interest will be charged, but you are not required to make regular repayments.

[ Related Post: Reverse Mortgages in Australia, Seniors First Video ]

Reverse Mortgage can help the economy because:

  • It will provide much-needed cash for retirees to finance their needs
  • It will serve as a supplemental fund for insufficient pension
  • It will mobilise the idle assets estimated to be worth around $625 billion

As a matter of fact, the government also offers its own version of reverse mortgage known as the Pension Loans Scheme or PLS, which grants 45% of home equity. 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 homeowners.


However, not all Australian pensioners can take advantage of the PLS, as it is only available as an income stream. Hence, if you need lump sum cash, you can try reverse mortgage loans offered by private lenders.

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.




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,



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.