Reverse Mortgage Loan Blog

Despite the warnings from consumer groups‚ the success of reverse mortgages is still going on among boomers. More than 27 000 Australians already used this possibility for overseas holidays‚ home renovations‚ medical bills or supplement their pension. Industry forecasts suggest the value of reverse mortgage loans will grow to about $5 billion by 2015.

Cash-strapped retirees are rushing to spend money tied up in the value of their homes under innovative loans that do not require regular repayments. More than 27‚000 Australian borrowers have drawn more than $1.5 billion in equity from their homes to spend on overseas holidays‚ home renovations‚ medical bills and living expenses.

And the number of reverse mortgages is doubling every 18 months as baby boomers are reaching retirement and finding they do not have enough money to live the way they want. Industry forecasts suggest the value of reverse mortgage loans will grow to about $5 billion by 2015.

Most reverse mortgage products guarantee that borrowers cannot owe more than the value of their home‚ but consumer groups have warned borrowers to be aware that their debts can rapidly increase.

The executive director of the Senior Australian Equity Release Association of Lenders‚ Kieren Dell‚ said there were expected to be 40‚000 reverse mortgage borrowers by the end of the year.

“Given the ageing population and that baby boomers are moving into retirement‚ we expect a good proportion of them will explore the (reverse mortgage) option over the next five to 10 years‚” Mr Dell said.

“Their increasing use of regular draw-downs indicates that they are using the funds more and more to supplement their pension rather than for one-off spending.

“The alternative is to sell the house and incur all the transaction costs. This is like selling a bedroom.”

Debts on the loans accelerate the longer they go unpaid‚ but many borrowers are unconcerned because of the lifestyle benefits the loans bring.

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