Mortgages for Seniors

Mortgages
for Seniors

It is not uncommon for Australian seniors to live in homes of high value given the capital growth that may have occurred over many years and they have little or no mortgage.  This group also often have very little superannuation as it has not been in place for the duration of their working life.  They are therefore frequently asset rich but cash flow poor.  The Australian government has legislated to allow these citizen to access this equity in their homes under strict conditions so they can avoid having to sell their homes to access this money for any purpose.  The beauty of reverse mortgages is that they borrower does not have to make loan repayments.

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The maximum loan amount that they can borrow is determined by the age of the youngest borrower.  The older the borrower the greater amount that they can borrow up to a maximum generally around 40% loan to value ratio which differs lender to lender.  The loan can be used for any purpose.  This could include travel, renovations on their home or investments in other income producing assets for example. 


The loan repayments are added to the loan so the loan amount grows over time.  The property value is also likely to increase.  The repayment of the loan is triggered either by the death of the borrower or the sale of the security property but the bank will only be repaid the amount of the debt or the value of the property should it be less than the outstanding debt.  This ensures that the borrowers are not leaving a debt for their dependants but is also means that the inheritance of the property will be affected so it is important that the borrowers seek independent legal and financial advice and it is advised that their family are involved so they are fully aware of the implications.  That said, it allows older Australians the chance to improve their cash flow position and often quality of life in their older years.


Reverse Mortgages are a very specialised loan product and the number lenders offering them is limited.


Please refer to the Reverse Mortgage Fact sheet attached for more information. (Andor: I will supply this but it is also attached to a link on my current website.)

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