What is a reverse mortgage?
A reverse mortgage is just like a regular home loan, however it has been designed especially for the needs of seniors. It allows Australians aged 60 and over to release some of the equity in their home to live a better retirement. No regular repayments required, the interest is added monthly to your account and the debt then repaid from the future sale of the property.
Reverse mortgage loans are also very flexible, you can choose to receive the funds as a lump sum, via regular advances, set aside in a cash reserve facility (similar to a “line of credit”), or a combination of all three. Importantly, you continue to own and live in your home for as long as you wish, continuing to enjoy the benefits of your community, social network, and family memories.
The funds can be used for any worthwhile purpose, including home improvements, travel, a new car, debt consolidation, medical costs, living expenses, and of course aged care. The amounts don’t have to be large to transform your quality of life in retirement.
Like all mortgage loans, applications are subject to loan approval criteria, and fees and charges will apply. Independent legal advice is compulsory and, as the interest is added monthly to your loan, financial advice is recommended.
Using a reverse mortgage for aged care
A reverse mortgage can also be used to fund aged care expenses. Whether funds are required for residential aged care or in-home support, a reverse mortgage can be used. While the government does subsidise aged care expenses, this can be dependent on asset and means testing. Many seniors may still struggle despite receiving government subsidies, and wealthier seniors may not be eligible for certain benefits.
Residential aged care providers often have a number of ways for people to pay for accommodation at the facility, most commonly they will ask if you wish to pay via an upfront Refundable Accommodation Deposit (RAD), a Daily Accommodation Payment (DAP), or a combination of both. There are usually supplementary charges payable for the care provided as well. In addition to their complexity, these fees can be quite high (the RAD regularly exceeds $500k in major cities) and may even cost more than what can be afforded on the age pension.
With costs such as gas, electricity, medical, and other bills continuing to increase, the reality is paying for the care needed in addition to these everyday costs can be a struggle, despite government subsidies. If you are required to shoulder a portion of your aged care expenses, a reverse mortgage may help ‘close the gap’ and allow you to access the care which you need, and continue to pay for everyday expenses, without selling the family home. This provides flexibility and breathing space for seniors and their families during what can be a stressful period.
How much can you borrow?
The amount you can borrow is dependent on your age and the value of your property. At 60 years of age, you may be able to access up to 15%, but at 90 you can choose to release up to 45% of the home value. If you (and your spouse) are residing in aged care the loan term is limited to five years, but the amount available could increase to 20% at aged 60, and 50% of the home value at aged 90.
Who is Heartland Seniors Finance?
Heartland Seniors Finance is Australia’s leading reverse mortgage provider. Established in 2004, Heartland has assisted over fifteen thousand customers aged 60 and over release equity from their home, helping them to live a better retirement, with independence and dignity. We are also proud to be Canstar’s Reverse Mortgage Provider of the Year since 2016, and Money Magazine’s Best Reverse Mortgage for the past three years.
Heartland are also committed to providing information that can assist you in making an informed decision as to whether a reverse mortgage could be right for you. One of the ways we have done this is through our complimentary Reverse Mortgage Insights Guide, which can be accessed here.
IMPORTANT NOTICE: This information has been prepared without taking account of the needs, objectives, or financial situation of any particular individual. Applicants should consider their own circumstances and, if necessary, seek professional advice. Applications are subject to loan approval criteria. Terms, conditions, fees and charges apply. Credit provided by ASF Custodians Pty Ltd (ACN 106 822 780 / Australian Credit Licence No. 386781).