What is a reverse mortgage?
A reverse mortgage helps you unlock the equity in your home, by borrowing a percentage of your home’s value, to give you extra cash for your retirement. This is perfect for those who have assets but lack a viable income and find that their retirement lifestyle is eating into their savings.
A reverse mortgage gives you instant cash for any needs that arise or to fund your lifelong dreams, while still living in your beloved home. There are no repayments during the lifetime of the loan. The loan is paid back when you sell your house or when you die, whichever comes first. As long as the value of your home goes up, it will be enough to cover the principal amount, interests and other fees.
Generally, you can borrow a higher percentage of your home’s value the older you are. For example, some banks can lend up to 20%-30% of your home value if you are in your 70s.
What are the benefits and drawbacks?
- You can’t owe more than what the house is worth. This is a regulation imposed by the government to protect retirees, especially those who may need to pay for a nursing home.
- You don’t have to pay any monthly repayments, unlike a home loan.
- The loan is only paid back when you sell the house or dies. Some lenders have a clause where the loan tenure can end if you move into a nursing home.
- You or your estate can keep all the profit of your home’s sale after deducting the principal, interest and other fees of the loan.
- The interest rate is usually higher than most home loans.
- The longer your loan tenure, the bigger your debt will grow and you may not get any profit after selling your house.
- If you need to sell your home quickly, you will incur higher costs to break your contract.
- Not everyone qualifies for a reverse mortgage and applicants are carefully pre-screened.
Why work with us?
A reverse mortgage is not for everyone. It can ruin your old age if you fail to plan properly and have limited cash or assets left after settling the loan. While the cash is tempting, you must carefully consider the implications.
We’ve handled various clients who have managed to enjoy their retirement through comprehensive planning and risk mitigation. We can:
- Study and assess your financial situation
- Offer comprehensive advice
- Plot your finances including cash flow
- Search and recommend the best reverse mortgage package
- Do all the hard work and paperwork for your reverse mortgage