Australian Reverse Mortgage Rates 2022
7-MINUTE READ
Approaching retirement in an uncertain climate may offer greater stress than you had anticipated. Alleviate some worries with an extra cash injection by using the equity locked in your home!
A reverse mortgage can help make your life much more comfortable by accessing the equity in your home. Customize your loan with a range of payment options and cash access choices!
Furthermore, Australian Expats can apply for a reverse mortgage loan, providing you are an Aussie citizen or permanent resident!
Read on to discover how reverse mortgages work and how finding your perfect deal at Odin Mortgage will benefit you!
What Is a Reverse Mortgage?
A reverse mortgage allows you to access the equity in your home. You can remain living inside your property whilst borrowing a lump of cash to spend as you wish! You will pay back the money borrowed from the lender in instalments, or on the sale of the property.
Equity is considered to be the value of your property minus any debt owed. For example, if your home is valued at $500,000 and you owe $100,000, your equity is $400,000.
Is a Reverse Mortgage a Good Option?
A reverse mortgage is a great option to take if you have equity in your home and you need quick access to cash! Use the money to pay for another investment, contribute towards your child’s home loan deposit, or simply enjoy luxuries!
Many people love the idea of taking out a reverse mortgage. You can stay living in your home yet access a large amount of money! Choose either a lump sum cash payment or regular income instalments from the lender.
Enjoy your retirement to the full without skimping on the luxuries you deserve to have. Or, help your children gain a foot on the property ladder with home loan deposit contributions.
You pay the lender back in instalments or clear the remaining balance when you sell the house.
However, reverse mortgages do come with higher interest rates than a typical home loan mortgage. On average, you will need to pay around a 5% – 6% interest rate, perhaps making your repayments more expensive than you expected!
Also, ensure that you pay all reverse mortgage repayments on time, or risk damaging your credit score. Your home will be repossessed if you breach the reverse mortgage contract and fail to pay your instalments.
You must also note that future changes in the property market may retrospectively impact your reverse mortgage decision.
If the value of your property declines unexpectedly, you could face entering negative equity. This means that you will owe more money on the house than what the house is currently worth.
Get a free Australian mortgage assessment today.
Who Can Apply for a Reverse Mortgage?
Anyone aged over 60 years old with a good level of equity in their property can apply for a reverse mortgage!
Your property will be formally valued by a qualified valuer and an agreement will be reached to decide the property’s value. You will then need to prove how much you owe on the property, such as a current home loan or any other secured debts.
Most people over 60 years old will have paid their previous home loan debt in full. This will lead to you acquiring 100% equity in your home!
When possessing an acceptable level of equity, a lender may then offer you a reverse mortgage. You will be presented with a schedule of repayments that you will need to pay, complete with interest.
Your loan term duration will be stated so you understand how long the reverse mortgage will last. It will be made clear to you that your home may face repossession if you fail to make the repayments.
If you sell your home or pass away before repaying all instalments, the lender will recoup what is owed to them during the sale. Keep this in mind when considering a reverse mortgage as it may hinder any inheritance you leave behind!
How Does a Reverse Mortgage Work?
Enquire about a reverse mortgage with Odin Mortgage! We will find you your best refinance deal, unlocking the equity in your property!
Follow these easy steps to secure your perfect reverse mortgage deal!
- Inquiry. Contact your expert mortgage broker at Odin Mortgage and hold an initial discussion.
- Application. We will estimate your property’s worth using an appraisal and ask you how much you wish to borrow. Do you want to pay the lender in instalments or when the house is sold?
- Lenders. We will find you a range of lenders and reverse mortgage options for you to consider.
- Valuation. Your property will be valued before securing your reverse mortgage deal, making sure all information is correct.
- Approval. You will receive confirmation of your reverse mortgage approval and your repayment conditions.
- Cash! You will receive the cash extracted from your home’s equity! You can choose to receive a lump sum or regular instalments from the lender.
- Repayments. Choose to pay the lender in instalments and aim to clear the debt quickly! Or, choose to pay nothing right now! Allow the lender to take the money they are owed when you sell the property, or when you pass away. Interest will be compounded until the sale occurs, however.
Are There Different Types of Reverse Mortgage?
All reverse mortgages operate as equity release products so you can get hold of the cash locked in your home!
However, there are different types of reverse mortgages in relation to how you access the money from the lender.
Lump Sum
Many homeowners request a reverse mortgage to acquire a lump sum in equity. Perhaps you want a chunk of money in the bank during your retirement? Or to freely choose when to take a luxury holiday?
Alternatively, access a lump sum to provide an early inheritance to your children! Help your offspring buy their first home and contribute to their home loan deposit. It is wise to distribute an early inheritance to your children in this way so they can buy their first home faster!
Income Stream
Choose to receive regular instalments from your lender, contributing to your monthly income stream and making life much more comfortable!
Agree with your lender on how much you would like to receive each month. Perhaps you can acquire early retirement, choosing reverse mortgage instalments until you fully reach pension age?
There are additional reverse mortgage differences in how you pay the lender back the money you have borrowed.
Get a free Australian mortgage assessment today.
Instalments
Pay back the money you have borrowed from the lender in instalments, similar to how you paid back your original home loan. Your repayments will consist of a principal amount and an interest amount, totalling a monthly figure.
Only agree to pay the lender in instalments if you are sure you will be able to make the repayments. Failing to do so will result in a default, risking home repossession.
Sale of Property
You can choose to pay nothing to the lender until you sell your home. If you decide to sell the property, your lender will recover their money on sale completion.
However, if you die before your property is eventually sold, your lender will recoup the money you owe them from your estate.
How Much Can You Borrow With a Reverse Mortgage?
The amount you can borrow with a reverse mortgage depends on how much equity you have available in your home. Lenders will use a reverse mortgage calculator to total how much you can borrow.
Additionally, the older you are, the higher percentage of equity you are able to borrow.
You could borrow up to 50% of the equity available in the property, although this varies from lender to lender. Lenders never allow a borrower to lend 100% equity for several reasons.
Predominantly, if the value of your property decreases, you will enter negative equity. The lender will not receive all monies owed to them.
The following factors will impact the amount of money you are able to borrow when requesting a reverse mortgage.
What Impacts Reverse Mortgage Borrowing? |
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What Should You Consider Before Taking Out a Reverse Mortgage?
Consider if you really need the money from a reverse mortgage before agreeing to the contract. You will be paying a relatively high-interest rate on money that would be 100% your if you sold your home.
However, many homeowners prefer not to sell their home later in life. Perhaps you are settled and nostalgic about your home? A reverse mortgage offers the priceless benefit of allowing you to remain living in your property for the rest of your life.
Do remember that if you were to die before the reverse mortgage has ended, your estate will decrease dramatically. Your lender will recover what is owed to them before any of your relatives receive any monies.
What Is the Interest Rate for a Reverse Mortgage?
Odin Mortgage will find you the best comparative interest rate for your home loan. Average mortgage rates in Australia are fluctuating so seeking expert advice from our brokers is a very wise move!
Typically, a reverse mortgage interest rate will present above 5% to as high as 6%. Variable reverse mortgage interest rates do tend to be slightly cheaper across the reverse mortgage market.
This is a high level when compared to home loan interest rates but is typical for reverse mortgages. However, RBA cash rate hikes are certainly impacting interest rates further!
Here are the latest interest rates for a reverse mortgage in Australia. Remember to check for up-to-date reverse mortgage interest rates with Odin Mortgage!
Reverse Mortgage | Variable Rate | Comparison Rate |
Express Reverse Mortgage | 4.75% | 4.77% |
ASAG Reverse Mortgage | 4.92% | 5.11% |
Household Capital | 4.95% | 4.98% |
G & C Mutual Retirees | 5.22% | 5.28% |
Heartland Reverse Mortgage | 5.50% | 5.53% |
IMB Reverse Mortgage | 5.57% | 5.61% |
Get a free Australian mortgage assessment today.
How Is Interest on a Reverse Mortgage Calculated?
Reverse mortgage interest rates are calculated through compound interest. The longer the loan duration, the more interest you pay. Therefore, if you choose not to make repayments, you could be facing a high reverse mortgage bill eventually!
This is where reverse mortgages tend to get their name from. With a standard home loan, you pay monthly repayments and the amount you have borrowed decreases. Providing you are paying principal repayments, of course!
Due to this certainty, you know how much you will pay throughout the loan. When opting for a reverse mortgage with zero repayments until the property is sold, there is no certainty.
You don’t know when you will want to sell-up, or when you will pass away. For this reason, the interest you pay in total will continue to rise to very high levels.
You do have negative equity protection, however. Therefore, if your home sells for less than the amount you owe the lender, you do not owe the lender the additional sum. They will receive the total property value but cannot ask you to pay extra.
What Is the Typical Term for a Reverse Mortgage?
A typical term for a reverse mortgage is either 5 years or 10 years. This type of reverse mortgage loan is usual when you are paying instalments back to the lender.
However, what if you choose not to pay instalments to the lender? If you allow the lender to recoup their money on the sale of the property or your death, the loan term is endless. It will end either when you choose to sell the house or when you pass away, whichever is first.
Are There Any Additional Costs to Pay With a Reverse Mortgage?
There are no additional costs to pay to Odin Mortgage, as our service to find you the perfect reverse mortgage is free! We recover our fee from the lender you decide to choose.
However, lenders will charge a range of fees, such as an establishment fee of between $500 – $1,000. You may have to pay additional fees of several hundred dollars for loan discharge and amendments, such as increasing limits.
Additionally, consider any early repayment fees if you decide to clear your loan balance.
Are There Any Other Options Similar to a Reverse Mortgage?
The Home Equity Access scheme is similar to a reverse mortgage, although it is a government programme. If you have reached pension age and own a property, you can apply for the scheme to release cash from your equity.
Choose fortnightly payments and receive 150% of your pension rate or a fixed amount of your preference.
Choosing the Home Equity Access scheme will result in a lower interest rate of 3.95% at present. You can repay your Home Equity Access loan at any time, and you can transfer the loan to a new property if you sell.
This is a good option if you are looking for a smaller amount of cash from your home equity at a lower interest rate.
Contact Odin Mortgage Today!
Whatever financial or credit product you are considering, Odin Mortgage can help! We are Expat experts and can find the perfect Australian secured loan from your preferred credit provider!
Get your home loan approved fast, or refinance your home loan to a lower rate! Or speak to us about the best reverse mortgage opportunities available from our database of lenders!
Our service at Odin Mortgage is free for you to use, securing our fee from the credit provider you choose.
Request a call from Odin Mortgage today and find out how our mortgage brokers can help you!
Get a free Australian mortgage assessment today.
Frequently Asked Questions
Will I still own my home with a reverse mortgage?
Yes, your home still belongs to you once you have secured a reverse mortgage. You can live in the property for as long as you want and will never be asked to sell unless you default repayments.
Live in the property for the rest of your life, or choose to sell and downsize to a smaller property. Your remaining reverse mortgage debt will be recovered when you reach sale completion.
Can I protect some inheritance if I apply for a reverse mortgage?
Ask our experts at Odin Mortgage about a ‘Protected Equity Option’! Before agreeing to the reverse mortgage, a percentage of equity can be safeguarded, untouched, by the reverse mortgage interest rates.
This feature will vary by lender, although Odin Mortgage’s specialist brokers can help you negotiate this!
Can I pay my loan balance early?
You can usually pay your loan balance before the loan term has met fruition. However, you may have to pay early repayment fees to do so.
Make sure you read your relevant product disclosure statement for full information. Seek professional advice from Odin Mortgage before agreeing to a reverse mortgage.
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