Reverse Mortgage Facts
You can draw funds as regular instalments, a lump sum or as a cash reserve (similar to a line of credit) or, depending on the level of equity and home value, a combination of these.
You can use the money for any legal purpose including to top up your income, refinance debt, pay for medical treatment or aged care, gifting or big purchases such as home renovations, vehicles and travel.
You can sell your home at any time – with no exit costs or penalties to the loan.
You can make part or full payments at any time – though no repayments are actually required.
If you are receiving regular instalments, you can choose to stop these payments if you decide you don’t want or need them.
You can also choose to increase your payments, if your financial position allows you to.
Accessing funds from your home via a reverse mortgage will reduce the amount of equity you have in your home over time.
The fees and interest added to the loan balance compounds over time. This means you pay interest on your interest, plus you will pay interest on any fees and charges added to the loan balance.
Over time, the amount you owe the lender will increase and the longer you have the loan, the more the interest compounds and the bigger the amount you (or your estate) will have to repay.
A reverse mortgage is generally repaid when you sell the home – either to downsize or because you / or your partner have passed away.
The lender receives the total loan amount (including all accrued interest and charges) with the balance of the sales proceeds going to you or your estate.
Should the total value of the loan be more than the sale price of the house, you (or your estate) are not liable for the difference and the lender has to wear the loss.