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Reverse Mortgage

Discussion in 'Property Finance' started by sumterrence, 10th Jul, 2015.

  1. sumterrence

    sumterrence Well-Known Member

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    I thought ill start a thread on the pros and cons of reverse mortgage as it seems like a rather odd loan that we see now a days.

    What are the potential pitfalls that would cause the borrower and the potential financial benefits?
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Not many forum members would have these. You need to be a minimum age - around 70 years old. Its an LAR - Loan to Age Ratio - on the amount. The older you are the more you can borrow (as you are closer to death).
     
  3. Mick C

    Mick C Well-Known Member

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    yea...LVR is like base LVR of 30% and goes to 50% at age 85...sort of a unique product for the right situation.

    - No income or low income
    - Over 65
    - Want to access your properties "value/equity" without selling + wanting to live in the property at the same time.
    - Need the money to spend or holiday etc..

    Def def need to speak to a financial planner and i always ask the borrower to seek independent legal advice first...
     
  4. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    we have a few in our portfolio over the years

    the cons are somewhat small

    ta
    rolf
     
  5. sumterrence

    sumterrence Well-Known Member

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    Thanks for the reply guys, I've spoken with a financial adviser and he strongly against it, but I thought it's a great idea for seniors to have access to their equities.

    What would be the worse case scenario that could happen, and also with your experience does anyone of you done a reverse mortgage for your clients before?
     
  6. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    The FA you have been seeking advice from, what is their "alternative" to funding living costs ?

    The only real alt is to sell and invest the proceeds


    ta
    rolf
     
  7. albanga

    albanga Well-Known Member

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    My pop has a reverse mortgage which was basically a neccessity when nan got sick and helped heaps with Her last years and then the funeral.
    In that regards I think they are really good, as Rolf suggested, whats the alternative? Sell your house when your that age and move into a rental?

    On the reverse then now the bank continues to own more of his home each year meaning less will pass to my mother upon his death. As my mother basically has no super that is her living in her later years. Now ofcourse the idea is the property increases in value more than the interest costs incur and this may happen but I know that has not been the case for my pop in the past 3 years and he lives in Melbourne.