Helping your parents enjoy a comfortable retirement

P&N Bank is one of a handful of lenders to offer eligible over 65’s access to the equity in their home with a reverse mortgage.  So, if your parents or relatives are considering options for a comfortable retirement, a reverse mortgage might be the right choice for them.

How reverse mortgages work

A reverse mortgage allows retirees to convert the equity in their home into accessible cash for a more comfortable retirement. Just like conventional mortgages, a reverse mortgage is secured against the borrower’s house. However, unlike conventional mortgages, the borrower doesn’t need to make regular payments on this type of loan. Once the loan is funded, interest is charged just as it normally would be, but the loan only needs to be paid out when the borrower sells their home, moves into an aged care home, or passes away.

What can it be used for?

A reverse mortgage can be used for a range of purposes, such as day-to-day expenses, consolidating bills, funding home improvements or renovations, helping the family, travelling, or a specific purchase, such as a car.  Here are few of the benefits that reverse mortgages offer.

• Stay in their own home longer – enjoy more time in the home they know and love.
• Fund worthwhile costs – living expenses, travel, medical expenses, home improvements.
• No need to make repayments – the debt will be repaid from the sale of the property at the end of the loan.
• Flexibility to make voluntary repayments if they wish to reduce your balance and interest charged.
• Negative equity protection – they are protected from owing more than the value of their home.

Is a reverse mortgage right?

While a reverse mortgage can be a great option for “asset-rich, cash-poor” retirees, it isn’t for everyone. If your parents or familly members are considering the option, it's important they get the right advice, and discuss it with you or any other beneficiaries.

P&N Bank has been providing reverse mortgages for some time and we ensure prospective reverse mortgage customers have a strong understanding of what is involved. Our lending specialists take the time to ensure customers fully understand the nature of the product and how it can work best for them.

Everyone’s circumstances are different and it’s important that your lender understands what you need and helps you decide if a reverse mortgage is best for your family member's circumstances. We also require them to seek independent legal advice before signing up for a reverse mortgage.

What else do I need to know?

If you're proposing a reverse mortgage as an option, here are some important things that will need to be taken into consideration before applying for a reverse mortgage.

• Interest rates and fees are generally higher than they are for conventional mortgages.
• Because the borrowers aren’t required to make regular payments against their debt, interest will be charged to the loan and the debt will increase.
• A reverse mortgage may affect pension eligibility.
• If there is anyone else living in the property (a tenant or other relative) with the owner, they may not be able to continue living in the home when you pass away.

What next?

If your parents or family are approaching retirement and are considering all options to fund a more comfortable, enjoyable retirement, P&N Bank’s Reverse Mortgage Home Loan is a good way to use existing equity in their own home, while remaining in their home.

For more information, please contact us on 13 25 77 and we can arrange an appointment to speak with one of our accredited reverse mortgage lenders.

Note: As of September 18 2012, anyone who takes out a reverse mortgage is protected from owing more than the value of their home. This is a measure put in place by the government and is known as negative equity protection. When it comes time for the loan to be repaid and your home is sold, the lender will receive the proceeds of the sale, and the borrower or their estate cannot be held liable for any amount owing in excess of the value of your home. Conversely, if their home sells for more than the value of the loan, the estate will receive the remaining funds.