No Monthly PaymentsStay in your home Tax free income
Enjoy a more comfortable retirement with a household transfer
What is a reverse mortgage?
Most Australians dream about retirement. What they’ll do, where they’ll go, having more time with family and doing the things they love. For some people, however, this dream becomes a nightmare. The cost of living keeps going up, superannuation balances diminish, and the Age Pension doesn’t adequately provide for a comfortable retirement.
Retired Australian homeowners have the opportunity to tap the savings they’ve accumulated in their home using a reverse mortgage. It’s an equity release product that allows you to release some of the accrued value – or equity – built up in your home. You can use your home equity as an income stream or take it as a lump sum. Alternatively, you can do both.
How does a reverse mortgage work?
A reverse mortgage allows you to access the equity in your home through a loan facility that doesn’t require repayment until you vacate the property.
The amount you can borrow is a function of your age and the value of your home. The older you are, the more you can borrow. The Loan to Value ratio – or LVR – increases by 1% for each year older than 60.
As a guide, if you’re aged 60, the maximum amount you can borrow is 15% of the value of your home and if you’re aged 75, the maximum amount you could borrow would be 30%.
The purpose of taking out a reverse mortgage loan is to access the savings in your home without needing to sell it. That way, your home can be both the best place to live and the right way to fund your retirement. See how our reverse mortgage, the Household Loan, could improve your retirement.
Reverse Mortgage Calculator
See how our reverse mortgage, the Household Loan, could improve your retirement.
Try our simple calculate
Reverse Mortgage Interest Calculation
How does interest work on a reverse mortgage?
Accessing the savings in your home using a reverse mortgage will reduce the amount of equity you have in your home over time.
Because regular repayments are not required, the interest added to the loan balance compounds over time. This means you pay interest on your interest. Over time, the amount you owe the lender will increase. The longer the term of your reverse mortgage, the more the interest compounds.
Alternatively, Household Capital offers an ‘interest only’ facility, where you can make regular payments so that at the end of the term, only the amount you borrow is repayable.
See our current interest rates and fees
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Drawdown or Lump Sum Fund Availability
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How do I repay my reverse mortgage?
Your loan is generally repaid from the future sale of your home. This may occur if you downsize later in retirement or move into aged care. Alternatively, the loan will be paid from the proceeds of your estate.
Of course, if you find yourself able to repay the loan earlier, you can do so.
Reverse Mortgage Benefits
The central benefits of using a reverse mortgage to improve your
retirement funding are:
- Increase your retirement income
- Improve your retirement lifestyle
- Remain living in your own home
Enjoy your retirement… The one you you’ve worked hard for.
Protections and Regulations
There are consumer protections for anyone taking out a reverse mortgage; in fact, they are tightly regulated with inbuilt protections, which include:
- The ‘No negative equity guarantee’, which means that you are protected by law and cannot end up owing lenders more than your home is worth
- You remain the owner of your home and the title remains in your name
- You can stay in your home for as long as you want or able to.
HOW PEOPLE USE REVERSE MORTGAGES
Our customers have approached us with a diverse range of needs. These have included:
- Setting up a regular income facility
- Refinancing an existing mortgage
- Renovating or modifying their home to ensure it’s safe and comfortable for retirement
- Covering unexpected medical expenses
- Buying a new car
- Helping children or grandchildren with first home buyer’s deposits or educational expenses
- Funding in-home care expenses
- Transitioning to residential aged care.
We find a lot of people simply like the security that comes from having a contingency fund for those unexpected expenses that can crop up from time to time.
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