Today, Household Capital, Heartland and some smaller lenders provide reverse mortgages. The Pension Loan Scheme (PLS) is an Australian government initiative that helps self-financed pensioners and retirees to receive increased income. It is a voluntary reverse mortgage scheme that allows Australians to receive a biweekly non-taxable supplement guaranteed by the value of their homes. It works much the same way as a typical reverse mortgage, with compound interest, and the loan can be repaid in increments at any time or in full when the property is sold.
The amount you can borrow with a reverse mortgage will depend on the amount of equity you have in your home, although you will generally only be able to borrow a certain percentage of the principal. That said, reverse mortgages are not risk-free and anyone who wants to access the burden-free value of their home should have a good understanding of the basics. Because you already own the asset you're borrowing against, reverse mortgages tend to be much less risky than traditional loans, because the outstanding value of the loan can always be covered by selling the property. You are generally free to pay a reverse mortgage without a penalty being applied while you are still living in your home, but check with your lender for confirmation.
Reverse mortgages aren't available to everyone; obviously, you'll have to own your own home and be over 60 or 65, according to the lender. Several lenders resurfaced to be active with new loans, and there are rumors that other lenders will soon offer exciting new reverse mortgage loans for pensioners and retirees. You or your estate will not be asked to cover any deficits that may arise if your home sells for less than the amount owed on your reverse mortgage. At the lowest point of the cycle, only four banks remained viable reverse mortgage options for the Australian senior.
If unexpected and costly health care problems continue to appear, or other financial concerns of a repetitive nature occur, relying solely on a reverse mortgage can become quite dangerous. Senior's First has developed a reputation as an award-winning reverse mortgage broker and a trusted name among public policy organizations, the elderly care industry, senior groups, older borrowers and their families. Determining the target market for Heartland reverse mortgages can be found on the Heartland Finance website. Obviously, you don't pay monthly installments with a reverse mortgage, but it can still be a good metric to measure exactly how much you end up paying when your home finally sells.
Unlike a traditional mortgage loan where you are required to make ongoing payments, a reverse mortgage allows borrowers to continue living in their own homes without making any repayments. A reverse mortgage allows you to free up some of your home's equity now so you can spend it to cover costs and finance part of your retirement. While taking out a reverse mortgage doesn't necessarily make you ineligible for the old pension, it can have an impact on your eligibility to receive Centrelink payments. A reverse mortgage is often considered a loan for those who are “asset rich” but “cash-poor”, meaning that a large part of their equity may be immobilized in assets, rather than in available cash.