HOME EQUITY RELEASE & REVERSE MORTGAGE CONSIDERATIONS"Buyer beware" tips, provided by Sequal.
To assist seniors considering an Equity Release/Reverse Mortgage Home Loan, SEQUAL has designed a list of buyer beware commonsense tips based on its code of practice.
1. When shopping around for an Equity Release/Reverse Mortgage Home Loan, look for products that carry a clear no negative equity or non-recourse guarantee. This means you can never owe more than the net value of your property, provided the terms and conditions of the loan have been met
2. Discuss your proposed loan with family members or close friends, particularly if they are likely to be named as a beneficiary in your will
3. Seek independent financial advice from your financial adviser
4. Discuss the transaction with Centrelink to ensure you fully understand any impact on any benefits
5. Obtain independent legal advice from your solicitor
6. Make sure you have assessed all the costs associated with the loan
7. You should not be obligated to purchase any other product or service in order to receive an equity release product
8. Ensure that you are given a written package of equity release documents, covering the benefits and obligations of the product. This must include the potential effect of future house values, interest rates and the capitalisation of interest on the loan
9. Ensure that the loan you are about to sign is covered by the Uniform Consumer Credit Code (UCCC).
10. For overall piece of mind, ask your Lender: "Are you a member of SEQUAL?"*
* Provided by SequalWhat impacts will there be on your Centrelink Payments
Age Pension payments often make up a significant proportion of a retirees income and it is essential that they get in touch with Centrelink before taking out a reverse mortgage to discuss what implications this could have on the benefits they currently receive.
You may need to look at different alternatives either lump sum upfront or monthly draw downs and how these will be means tested. Generally the person receiving an Age pension can drawn down up to $40,000 without affecting their pension under the Assets Test. But if this amount is not spent within 90 days this could subsequently reduce their pension payment.Dont borrow too much
You will need to check with the relevant loan provider but in most cases the minimum reverse mortgage is about $10,000, however the maximum which can be borrowed is up to 25 - 45% of the value of your property. However this value depends on how old you are and whether you are taking the money as a lump sum or as installments over a period of time.
It is always recommended that you talk to a financial advisor before proceeding with any Equity Release or Reverse Mortgage product to ensure you have a clear understanding on how it effects your overall wealth. Discuss the equity release & reverse mortgage options with your family
You should talk to you family and friends about your intention to enter into a reverse mortgage product. They should also be aware of the terms and conditions of the loan, this is particularly relevant if they are going to be beneficiaries in your will because although you are only limited to borrow a small proportion of the value of the property, borrowers should be aware that if the property values do not increase the value of their equity in the property is diminishing leaving less to the nominated beneficiary. The reverse mortgage / Equity Release loan on the property will have to be settled within 6 months of the borrower passing away. Therefore leaving most beneficiaries in a situation where they have to sell the house to pay back the loan. Seek professional advice
When looking to enter into a reverse mortgage agreement you should talk to a specialist financial advisor or relevant professional to ensure that you have a true understanding of the equity release or reverse mortgage product. You need to ensure you understand your rights and obligations under your equity release / reverse mortgage agreement & have a true understanding of the terms and conditions.
This article is bought to you by Imperator Financial
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