Reverse Mortgage Loan Blog

The reverse mortgage can be a solution to compliment the limited superfund. Is it a scheme where property owners have access to the money they had accumulated throughout their life as equity to their home.

Through the reverse mortgage, you can “borrow” money for a period of time (usually between 10 and 20 years) against the value of your home, but without giving the house up. This money can be received either in a single payment in the form of monthly payments or as a line of credit which is available to the limit of the total borrowed funds. A reverse mortgage can either be on a residence or any other property that the person may have ownership until death. In fact, the bank will not require that the money be repaid until the property is sold or the owner dies. Banks advise to take on a monthly pension as security, in case the owner may live longer than the term of the mortgage.

The alternative to reverse mortgages is the sale or rental of the property. In both these cases one has to leave their home and look for another, which isn’t the most desired option for adults who want to continue living at home.

Reverse mortgages may only be granted by accredited institutions and by those insurance companies authorized to operate in Australia.

Options for heirs

When the owners of a reverse mortgage dies, their heirs must repay the cash which their deceased member had been receiving. The heirs have two options:

• They can keep the house and repay the loan with their savings or obtain another financing facility.
• Sell the house and repay the debt owed by the parent.

Tax advantages

Reverse mortgages have a number of tax advantages:

• The monthly fees received from the reverse mortgage are exempt from taxes.
• The reverse mortgage is also exempt from payment of transfer taxes and legal fees.
• The same applies for legal and registration fees for cancellation of the mortgage.

Disadvantages

The main disadvantages are:

• Costs involved setting up the mortgage
• As in any other type of bank loan, there is the interest charges.
• It can be seen as a loss of assets that took a lifetime to acquire, or a decline in the future inheritance of the family.

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