Above 60 and looking for Mortgage Home Loan? Reverse Mortgage Loan is the answer

If you’re a senior citizen in Australia, and a homeowner willing to convert your equity into cash, then Reverse Mortgage Loan is meant just for you. The Reverse Mortgage Loan allows you to borrow money in exchange for your equity as a home security, which can either be in the form of home, holiday home or investment property Australia wide. The Federal Housing Administration issues these loans and once the amount has been given to the homeowners, the home must be maintained by the residents as per the FHA guidelines.

The senior citizens can convert their home into liquid cash for various purposes, such as home renovations, medical and daily living expenses, etc. The borrower can take the amount from the lender as per his own needs; through a lump sum, monthly payments, or a line of credit. The interest on Reverse Mortgage Loan is charged just like any other loan, except that you don’t have to make repayments while you live in your home. However, the compound interest is, added to the loan balance over time, so you remain the owner of your house and stay in it for as long as you want. Basically, this type of loan does not have to be repaid until you choose to sell or move out of your home or the last surviving borrower passes away. You must repay the loan amount and the interest and fees along with it when you sell. The title of the home will stay in your name and you can receive your money in a variety of ways to suit your situation. The credit providers are required, by law to lend money responsibly to the borrowers, so that not everyone will be able to obtain this type of loan.

You must talk to your trusted Mortgage Broker for more information about this product and seek independent legal advice prior to making any decisions on this type of loan. Below are some of the benefits and pitfalls of Reverse Mortgage Home Loans for ease of home loan comparison, so that you make the decision that lies in the best of your needs-

Benefits of Reverse Mortgage Home Loans-

• Unlike traditional mortgages, in Reverse Mortgage Loan the borrower will be provided with the cash to fund his retirement without having to make any payments. It will be the lender, instead who will be entitled to make payment to the borrower through a lump sum, monthly payment or a line of credit.
• Reverse Mortgage Loans give the flexibility of qualifying to the borrowers, as they do not have to undergo any credit check.
• During the length of the loan, there are no monthly payments for the borrower. Even the interest and the fees are due when the loan is paid off.
• Since there is no income required to qualify for this type of loan, the property value is used to decide the eligibility and not the income of the borrower.
• Reverse Mortgage Loan does not affect the homeowner’s social security or Medicare.
• The income from a Reverse Mortgage is not taxable.
• Since the homeowners take the money from the lenders while living in his own house, the owners can receive the payment in several different ways.
• If at the end of the term, the property sells for an amount less than the loan, the lenders cannot go to your heirs for repayment of your loan.
• While living in your own home, you can use the loan amount for several purposes.
• As the owner’s age and the home equity increases, the amount that can be borrowed increases.

Pitfalls of Reverse Mortgage Home Loans-

• Once borrower/s passes away, the loan must be repaid before the title can be transferred to the borrower’s heirs.
• The Interest on the loan is compounded and cannot be deducted from income taxes until repaid.
• As the borrower’s equity decreases with each payment to the lender, the borrower may not have enough equity left for his future needs.
• Reverse mortgages usually only offer variable rates, which are generally higher than the average home loans.
• Property owners still have to pay property taxes, insurance & maintain the home as per the FHA guidelines, otherwise, the loan could be terminated.
• When closing the loan, the mortgage must be paid off with your own money or from the reverse mortgage loan.
• If you are the sole owner of the property and someone lives with you, then under Reverse Mortgage Loan, that person may not be able to stay when you move out or die (in some circumstances).

Reverse Mortgage Loan has more benefits than pitfalls. However, basis your requirements and liabilities, you must decide, with the help of your Mortgage Broker if this would be the right choice for you; he will help you with home loan comparison and guide you towards the right decision.

This is information is general only and is subject to change at any time. Your complete financial situation will need to be assessed before acceptance of any proposal or product.