BSB 806 015

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BSB 806 015

Plan for a more comfortable retirement in your own home

What is a reverse mortgage?

A reverse mortgage is specifically designed for homeowners aged over 65, allowing you to enjoy a more comfortable retirement while remaining in your own home.

With our Reverse Mortgage Home Loan, you can take advantage of the equity in your own home, for things like your day to day expenses, medical bills, funding home improvements or renovations, travelling, or a specific purchase such as a car.

Unlike a normal home loan, with our Reverse Mortgage Home loan, no repayments are required. The loan is repaid from the future sale of the property, either when you move on by selling the property or if you pass away.

Why a reverse mortgage?

Retirement can be expensive when you’re no longer working with regular income. A reverse mortgage is a great option for over 65s to benefit from your existing asset, your home, to live a little more comfortably.

  • Stay in your own home longer – enjoy more time in the home you 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 you wish to reduce your balance and interest charged.
  • Negative equity protection – you’re protected from owing more than the value of your home.

How does it work?

A reverse mortgage loan is settled at the end of the loan, rather than during. This is different from a normal home loan, where you make repayments throughout the life of the loan. However, like any loan, there are a number of conditions and requirements that determine your loan eligibility and how much you can borrow against your home.

The amount you can borrow is determined by your age (or that of the youngest borrower), location and value of the property, and the Loan to Value Ratio (your equity in the home).

With P&N’s Reverse Mortgage Home Loan, there are no upfront fees and you are not required to make repayments. Your interest will be added to the loan each month and the total debt, including amount drawn, interest charges and fees, will only be payable when you decide to sell the property, move from the property (such as into aged care), or if you pass away.

The Reverse Mortgage Home Loan is designed to be flexible, so if you prefer to make repayments to pay down some of the interest owing on the property, you can choose to at any time, and also redraw funds on the loan (minimum redraw amount applies).

If you choose not to make repayments, the loan balance will increase over the life of the loan. This will impact the value of the equity remaining in your property.

Borrowers are also protected by what is known as a negative equity guarantee. When it comes time for the loan to be repaid and your home is sold, the proceeds of the sale will cover any amount owing on the loan, and you or your estate cannot be held liable for any amount owing in excess of the value of your home. If your home sells for more than the value of your loan, your estate will receive the remaining funds.

Our specialist lenders can help you decide if a reverse mortgage is right for you.

What to consider

Like any home loan, a reverse mortgage is a big commitment and there are some things to consider. We’re here to help you through every step of the process.

Other people living in the home – If another person (e.g. a spouse, partner or other family member) is living with you, the other person may have to move out if you move into aged care or pass away. This is to enable the property to be sold and the loan repaid. A P&N Reverse Mortgage Home Loan enables ‘Tenancy Protection’ meaning you can nominate to protect your spouse or immediate family member living in your home as part of the loan application process to enable him/her to stay in the home for up to 6 months after your vacation of the property or death. This ensures they are protected should there be a need and allows time for your nominated person to find alternative accommodation. This comes with terms and conditions - make sure you discuss this with your lender before taking out a reverse home loan.
Inheritance for your children – it’s important to discuss your reverse mortgage decision with your children or beneficiaries of your estate. Entering into a reverse mortgage may impact your total assets and reduce what is available for inheritance.

Variable interest – our Reverse Mortgage Home Loan carries a variable interest rate, which can change with the market, meaning it could increase or decrease at any time.

Equity in your home – your loan balance will increase as you draw on the loan and as you are charged interest over time – this will decrease the amount of equity in your home. Making additional payments, while not required, will reduce the amount of interest charged.

Legal advice – Before taking out a Reverse Mortgage Home Loan, we require you to seek independent legal advice. We also recommend that you seek independent financial advice.

Impacts to your pension – You may be able to access some of your home equity without impacting your pension however this will depend on your individual financial situation and your assets. Your circumstances should be discussed with your financial advisor and/or Centrelink before applying for a reverse mortgage.

You may be able to access some of your home equity without impacting your pension however this will depend on your individual financial situation and your assets. Your circumstances should be discussed with your financial advisor and/or Centrelink before applying for a reverse mortgage.

Reverse mortgage at a glance

Loan purpose

Owner-occupied only

Minimum loan amount

$10,000

Maximum loan amount

Subject to borrower/s age and capped at $300,000 for all ages.

Redraw

Permitted with a minimum of $500

No redraw fees

Repayments

Repayments are not required but are permitted

Full repayment is required if:

  • Property owner/s pass away
  • Property is no longer occupied by borrower/s
  • Property is sold, or
  • Subsequent home loan is entered into.

Fees

No application or annual maintenance fees

Maximum Overall LVR

LVR restrictions are applied on an age range bases (based on the age of the youngest borrower, if an application is in joint names)

Metro zoned properties

Non-metro zoned properties

65 years to 69 years

20%

65 years to 69 years

10%

70 years to 74 years

25%

70 years to 74 years

12.5%

74 years to 79 years

30%

74 years to 79 years

15%

80 plus years

35%

80 plus years

17.5%

Standard conditions

  • All borrowers must be 65 years of age (or older).
  • Loan must be secured by owner occupied residences.
  • If the property is jointly owned, then the loan must also be in joint names.
  • All borrowers must reside in the house.
  • Independent legal advice must be sought by the borrowers and written evidence of such advice obtained.

Debt consolidation

  • Permitted. Minimum of 3 months recent and consecutive statements to be provided on any loan being paid out.
  • Loan discharge authority required for refinances.

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