Reverse Mortgage Loans are an alternative form of finance that may be appropriate for retirees with assets but limited income. We are experienced Adelaide finance, security and business lawyers. We can review and explain reverse mortgage loans in plain English – see our client Reviews. Call us to talk about your matter on a no obligation basis. We would be pleased to answer your questions without obligation.
What is a Reverse Mortgage Loan?
Reverse Mortgage or Equity Release Loans allow retirees aged 60 and over to use property as security for loans notwithstanding that they do not meet the income requirements for normal home loan financial products. Generally the interest rate of these loans are higher than most normal home loans and the application and set up fees tend to be higher.
How much the lender will be prepared to lend will depend on a number of criteria including:
- the age of the youngest borrower;
- the value of the security; and
- current interest rates.
Repayment of the loan is not required until the property is sold or the borrowers die. Interest will accumulate and compound until the loan is repaid.
ASIC have a Reverse Mortgage Calculator at their MoneySmart site which takes into account the various factors that will determine how much must ultimately be repaid and therefore how much equity will remain in the property.
All Reverse Mortgage Loans now provide a “no negative equity” guarantee. This means that the repayment amount cannot exceed the value of the security property. It is important however for borrowers to understand any conditions that attach to such a guarantee.
Loan proceeds may be taken as a lump sum, regular monthly payments, a line of credit or a combination of these.
As with all loans, borrowers need to consider the following:
- Loan application and finance costs;
- Costs of obtaining independent financial and/or legal advice;
- Competitiveness of interest rate;
- Obligations to financier under the terms of the mortgage;
- Reduction in flexibility with regards the secured property; and
- Whether an alternative arrangement may be more appropriate or cost effective.
How Long Will Legal Advice Take and How Much Does It Cost?
We will need to see the mortgage document at least one business day before we see you. We will read the mortgage and make notes to discuss with you.
We offer general advice on Reverse Mortgages for $1,250 plus GST. This amount is based on our general consideration of the mortgage document plus a 1 hour meeting with you to discuss our comments (with a focus on the effect of the Reverse Mortgage) and to answer your questions.
Contact us on 8362 6400 if you have any questions or if you would like to make an appointment for legal advice on a reverse mortgage loan.
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