Have you considered using your most important asset to fund a comfortable retirement? This is why many Australian retirees use their home equity to finance their future expenses. With a reverse mortgage, you can borrow a lump sum or create monthly income by leveraging your home's value.
For example, borrowing against your home equity lets you pay off loans, fund home renovations, or take that once-in-a-lifetime vacation you plan to have. Since you’re still living in the property, you don't have to make repayments unlike traditional mortgages. Instead, the bank sells the property to cover the loan when you leave or die
Using a reverse mortgage, you may cash out the value of your property without having to sell it. For example, you can utilise the money from a reverse mortgage to help your children pay for college or live a little more comfortably.
This financing option is helping a lot of homeowners get more revenue out of their property or their earnings. However, there are a lot of misconceptions about it, so not everybody is willing to test it out.
How Does a Reverse Mortgage Work?
Most lenders need borrowers to be at least 60 years old to avail of a reverse mortgage since your borrowing power increases with age. You can augment your retirement revenue with a reverse mortgage if you don't mind leaving an inheritance of debt to your children. The lender sells the property to compensate for the shortfall when the borrower moves out or dies.
Unfortunately, a reverse mortgage is a frequently misunderstood concept. In fact, many retirees struggle to make ends meet and are unaware that their home may support a happy retirement.
If you want to consider a reverse mortgage as a financial strategy, here are five typical misconceptions concerning reverse mortgages dispelled for your benefit:
1. The Loan Can Exceed My Property's Value
The entire loan amount under the government's No Negative Equity Guarantee can never go beyond the property market value at the time of loan maturity. For this reason, you won't have to worry about the loan surpassing the value of your house due to this ruling in your contract.
2. I Have to Give Up My Property’s to the Lender
A reverse mortgage is just a mortgage on your house, which means you will still maintain ownership over the property title. As the owner, you may elect to sell or refinance the property later to pay back your mortgage.
3. My Existing Mortgage Can Disqualify Me from a Reverse Mortgage
If you have a current mortgage to pay, you can still acquire a reverse mortgage if you first use the cash to pay down your existing mortgage. Doing so will help you manage your loans without compromising your financial stability.
4. Reverse Mortgage Can Affect My Social Security Benefits
A reverse mortgage usually has no impact on your social security benefits. However, it may diminish your benefits if you’re not paying attention. Consult with a financial specialist to learn how a reverse mortgage might influence your social security payout.
In reality, reverse mortgages should be part of a complete financial strategy rather than the last option for seniors struggling to make ends meet. This loan form will augment your income and enable you to live more comfortably, even post-retirement.
Wealthy You offers a range of mortgage choices to help you achieve your financial targets and requirements. We have operated in Sydney for almost a decade, offering alternative mortgage funding through flexible reverse mortgages, home equity loans, car loans, and the like to make refinancing your property easy for our customers. Reach out to us today!