Is a reverse mortgage right for me?

A reverse mortgage is a type of loan that allows the borrower to use the equity in their home as a security, and is typically used to supplement retirement income.

As Australia’s population continues to age, more and more individuals are wanting to live at home for as long as they can. However, as people are living longer, it may be the case that they have access to less disposable income as their savings diminish. There are a few different options available that allow people to utilise their home and its equity to obtain further access to funds.

Available options

There are a range of options available to individuals if they require further funds into retirement. They include:

• Obtaining a personal loan,

• Obtaining or refinancing a traditional mortgage over their property,

• Entering into a Homesafe Wealth Release arrangement, and

• Entering into a reverse mortgage.

Most people are aware of how traditional mortgages and personal loans operate. However, less people understand how Homesafe Wealth Release arrangements and reverse mortgages function.

What is Homesafe Wealth Release?

Unlike your traditional mortgages or reverse mortgages, Homesafe Wealth Release is a part-sale of your property. The property owner enters into a deferred Contract of Sale for a portion of the property, in exchange for an upfront lump sum payment.

This lump sum payment may be less than the market value of that share as you are retaining the right to live in the property.

When the property is sold into the future, you or your Estate will be entitled to the share of the sales proceeds not sold under the contract to Homesafe.

What is a reverse mortgage?

Unlike Homesafe products, a reverse mortgage is a loan structure which allows individuals to borrow using the equity in their property. This loan can be taken out as a lump sum or as different types of income and credit streams.

The main benefit of a reverse mortgage is you can access funds as you move further into retirement without having to sell your own home. You will also generally not have to repay the loan, interest or fees until you sell, move into aged care or pass away.

Are there any downsides to a reverse mortgage?  

If you are considering entering into a reverse mortgage, you should be aware of upfront fees and accumulating interest over the period of the loan under this arrangement.

Before entering into any arrangement under a Homesafe product or reverse mortgage, we would always recommend that you seek professional financial advice to ensure that the product is right for your circumstances.

How can Sharrock Pitman Legal help?

As Accredited Property Law Specialists, Sharrock Pitman Legal can assist you in drafting the necessary legal documents and finalising the release of funds to you under either a Homesafe Wealth Release product or reverse mortgage. We can also work with your financial adviser to ensure the best outcome is achieved. If you require further assistance, or have further queries regarding reverse mortgages please feel free to contact Principal and Accredited Specialist in Property Law, Andre Ong on (03) 8561 3317 or alternatively fill in the form below.

The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

Liability limited by a scheme approved under Professional Standards Legislation.

For further information contact  
Andre Ong

Andre is a Principal of Sharrock Pitman Legal.

He heads our Property Law Group and is an Accredited Specialist in Property Law (accredited by the Law Institute of Victoria).  He also deals with Commercial Law. For further information, contact Andre Ong on his direct line (03) 8561 3317.

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