A reverse mortgage is a type of home loan that allows a person to borrow money using the equity in their home as security. The loan can be taken as a lump sum, a regular income stream, a line of credit or a combination of these options. They are only available for people over the age of 60 and property restrictions may apply.
Interest is charged like any other loan, except a person does not have to make repayments while they live in their home – the interest compounds over time and is added to the loan balance.
The individual remains the owner of the property and can stay in it for as long as they want. The loan must be repaid in full (including interest and fees) when the borrower sells their home, dies, or in many cases, moves into aged care. While no income is required to qualify, credit providers are required by law to lend money responsibly, so not everyone will be able to obtain this type of loan.
If a borrower is on a pension they should always seek advice from a Financial Planner and Centrelink before they enter into a Reverse Mortgage.
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