Bluestone Reverse Mortgage

Discussion in 'Property Finance' started by Nickjjt1, 1st Oct, 2018.

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  1. Nickjjt1

    Nickjjt1 New Member

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    Back in the mid-2000s hundreds of elderly Australians took out 'fixed for life' Reverse Mortgages at rates of 7-8%pa with Bluestone.

    Over time, like a Reverse Mortgage does, the amounts owed have increased. Unlike other Reverse Mortgages, a person in this Bluestone product cannot voluntarily payback amounts owed without incurring a 'break fee'. In most instances the break fee is more than the principal + interest owed. Some people have coughed up the break fee as they wanted to get out of this hideous product, however most others are stuck and cannot afford to incur the break fee. The only way around the break fee is to die, or be declared ill and be forced into a nursing home. It is a despairing thought for those who have the mortgage and also their relatives.


    If you are one of the many who have paid the unreasonable break fee or if you are thinking of terminating your reverse mortgage but can't due to the break fee, then I urge you to contact your local member or the Shadow Treasurer Chris Bowen so that the Royal Commission can look into the issue. There is still time!

    Hopefully with enough pressure, Bluestone will refund the break fee and not force others to pay the break fee if they are considering terminating the product.
     
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  2. FXD

    FXD Well-Known Member

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    Is this the only product borrowers should be keeping away from?

    How about their home loan or investment loans? Anything dodgy there?

    Cheers,
    FXD
     
  3. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    As a non-conforming lender, I'd be staying away from all their products unless there's no alternative. Non-conforming lenders have a high risk of increasing rates due to the nature of their funding.
     
  4. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Many reverse mortgage products had and have such issues.

    RBS was one .

    To the OP ? Might be worth to actually mention what the break fee is with Bluestone, because its unlikely to be greater than the principal and interest owed...........

    The implication is if the principal is 100 k and accrued interest 60k , the break fee is greater than 160 k.................. ?

    Highly unlikely ?

    ta

    rolf
     
  5. Nickjjt1

    Nickjjt1 New Member

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    I am grateful for the ABC for bringing this out - something must be done about Bluestone! In this case, the couple owed 180k on their loan, but then they had a 150k break fee on top of that!

    Reverse mortgages leaving the elderly high and dry

    "AMY BAINBRIDGE: Margaret and Peter's son Tim passed away, and when Peter was 77 years old and developing dementia, they decided to move to a retirement village in 2014.

    Then, they were presented with their contract, which had a clause showing they needed to pay a break fee the bank had calculated at $150,000, on top of the loan costs, leaving them with a $330,000 bill."
     
  6. mikey7

    mikey7 Well-Known Member

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    Whilst I think the break fee is super harsh..

    ..surely this was all in the contract they would have read and signed?
     
  7. Scott No Mates

    Scott No Mates Well-Known Member

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    But that'd never be applied to me!!!! [​IMG]
     
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  8. Harry30

    Harry30 Well-Known Member

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    Peter, regarding non conforming lenders, do you put Libery and a Pepper into that category. To the extent I use these lenders (which is rare), I always make a point of moving the loan to a mainstream lender once servicability allows, largely to avoid the risk of rate increases, which I think is more prevalent with the secondary lenders v big 4 banks.
     
  9. Nickjjt1

    Nickjjt1 New Member

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    Yes there is mention of a break fee in the contract, but not how they calculate it.

    I have obtained break fees every year for the past few years in the hope that i can end my misery but it has only gone up every year despite the fact that i am old and one year closer to death every year. Every attempt i have made to get them to send me the calculation i have been rejected as they say they cannot disclose it. all they tell me is that interest rates have gone down. It is literally a black box calculation.
     
  10. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Is your rm. Variable rate ?

    Ta

    Rolf
     
  11. New Town

    New Town Well-Known Member

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    Reverse mortgages are only suitable for the financially illiterate - cause they don't realise how much they'll lose.
     
    Last edited: 29th Dec, 2018
  12. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    for many, the use of RM allows retirees to stay in their home, vs selling same and being at the end of various sharp and blunt instruments from gov and means testing etc that may end up with a much worse financial outcome middle to long term.

    RMs are like any financial product, properly used with appropriate advice, they are a useful tool

    ta
    rolf
     
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  13. Beano

    Beano Well-Known Member

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    The calculation of the break fee must be like borrowing 8pc on say a 10 year fixed mortgage and then wanting to repay the loan after the interest had fallen to 3.9pc
    There is a cost
    Watching the video above it appears the CBA charge 2pc above the normal lending rate.
    Still with the rise in the property prices perhaps they were still better off doing this way than selling the property and spending the proceeds (over the similar period)
    Need someone to do the numbers to get the answer
     
  14. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Just back from holidays today...

    Absolutely I put Pepper and Liberty in this category.

    These types of lenders and reverse mortgages do have their place, but they're for when there's no alternative. Despite explaining this to clients often, most don't really appreciate it until some time after the loan is taken.
     
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