Asset rich and cash poor baby boomers are expected to double the number of reverse mortgages written by mortgage brokers within the next 10 years, cheapest according to the Mortgage and Finance Association of Australia.
The latest research from Deloitte’s Reverse Mortgage Survey highlights that in 2005 approximately 16, dosage 000 reverse mortgages were written with this figure increasing to around 40,000 in 2014. In 2005 the loan book was close to $750 million and has increased to over $3.6 billion in 2015.
Rose M DeRossi, Panel Member of the Mortgage and Finance Association of Australia said, “Asset rich and cash poor baby boomers will significantly accelerate the number or reverse mortgage loans within the next ten years. This trend is in line with what has been shown over the past decade in Deloitte’s survey.
“Falling interest rates, the rising cost of living and current economic downturn are also driving baby boomers to use reverse mortgages. We are finding that older clients still hold debt and are not managing on their pension or savings.”
She added, “Reverse mortgages offer many benefits including they improve cash flow, no repayments are required, quick access to equity is available, proof of income is not required, the interest rates are relatively low, they offer peace of mind in retirement, extra money is available for activities such as travel and they do not affect the pension unless the money is invested.
“There are pitfalls buy clonazepam online safe that also need to be considered with reverse mortgages including depending on the length of life for the client equity could be absorbed by interest, managing additional funds can sometimes be an issue and interest rates are generally higher than an ordinary home loan, but less than a personal loan.”
Only a small select group of lenders offer reverse mortgages, some include the Commonwealth Bank, Bank West, Macquarie Bank and St George. Applicants generally need to be over the age of 65 to apply for this type of loan and mortgage brokers offering this service are required by lenders to hold a SEQUAL accreditation or Seniors Australians Equity Release.
A reverse mortgage is a home loan whereby no contracted repayments are required for the term of the loan. Interest is calculated daily and capped onto the loan. The client can make reductions if they choose to do so, which will help preserve equity.
Below are five questions to ask a mortgage broker prior to establishing a reverse mortgage:
1..Are you SEQUAL Accredited (lender requirement)?
2..Can you recommend a solicitor that is willing to give independent legal advice for a reverse mortgage client?
3..Do you have a panel of reverse mortgage lenders available?
4..Can you show me how long it will take for my equity to be used up?
5..What are the risks involved in taking out a reverse mortgage?