Best Reverse Mortgages
GOLD WINNER HEARTLAND SENIORS FINANCE Retirees can tap into home equity to ensure they don’t run out of money
Reverse mortgages let older Australians tap into home equity as a source of funds in retirement. Australia’s over-65s collectively hold around $500 billion in home equity – a potentially valuable resource that can provide an alternative to selling a much-loved home.
The choice between downsizing and reverse mortgages has become muddied. Since July 1, 2018 homeowners aged 65-plus have the option to make a downsizer super contribution worth up to $300,000 – or a total of $600,000 when a home is owned jointly by a couple – from the profits on the sale of a family home. The downside is that the cash left over after you buy a new place could impact eligibility for the age pension.
Reverse mortgages can potentially, though not always, eliminate this problem. The loan funds can be taken as a regular income stream or as a lump sum, and no repayments are necessary until you pass away or sell your home, usually to move into aged care. Be aware, though, that the cash received under a reverse mortgage can also impact age pension entitlements, so it’s something worth discussing with the Department of Human Services before you sign on the dotted line.
While reverse mortgages are an appealing product for seniors, the number of providers is shrinking. Today there are only a handful of providers – chiefly Heartland Seniors Finance, P&N Bank and IMB – and a lack of choice rarely works in consumers’ favour. One impact of this is that the rates on reverse mortgages are much higher than for regular home loans.
You have to hand it to Heartland Seniors Finance. It has been a stalwart of the reverse mortgage market for many years, and has topped this award for the past two years. While the loan is available from 60, the amount you can borrow is determined by your age and the value of the property. The loan can be taken as a lump sum, cash reserve facility, regular advance or a combination of these.
IMB’s reverse mortgage is the new kid on the block, having only been available since September 2018. It’s open to homeowners aged 70 or older, and the funds can be mixed and matched as a lump sum payment, regular payments or a flexible cash draw facility.
The P&N reverse mortgage is available for over 65s, with loan sizes starting at $10,000 and rising to as much as 35% of your property’s value.