Reverse Mortgage Requirements
When senior citizens look for a financial injection there aren’t very many options on the table as institutions avoid giving them long-term loans. While this is perfectly understandable, it is still great if these citizens can get their hands on some money. This is why there’s something called Reverse mortgage in Australia. This transaction allows elder people to receive money in exchange of parts of the equity of their homes. Naturally, such a financial service has rules and this is why now we will take a look at the reverse mortgage requirements.
First and foremost only people at the age of 60 or older can qualify for a reverse mortgage in Australia, In fact, more often than not some banks require you to be 65 in order to receive such a service. If two or more people are applying for this loan then the age of the youngest one is taken into consideration.
Age is also directly tied with the amount of money you are allowed to borrow. The older the borrowers is, the more equity can be released and therefore more money can be loaned. Typically, at the age of 60 you will be able to get about 15% of your home value in the form of a loan. Then, as your age progresses you will be allowed to release some more equity and receive additional funds. As far as age-related reverse mortgage requirements go, that’s the whole story.
When is the loan repaid? Unlike any usual loans, the reverse mortgage does not have monthly payments and is not due on a certain date. Instead, when the property is sold, the loan is repaid from the proceeds of the sale. This is a very important requirement as the size of the loan will keep growing until the last borrower passes away or the property is sold.
There are reverse mortgage requirements also when it comes to the interest. It is a compounding interest which means that the amount of money you will owe at the end will be significantly larger than what you have borrowed initially. In 20 years a $50,000 will turn into a sum larger than $220,000.
But does that mean that the loan can keep growing and eventually surpass the value of the property when it is being sold? No, the Australian government adopted a law clarifying some reverse mortgage requirements in 2012. It states that the amount of money a borrower pays back can never be larger than the sale price of the property. So even if you enter a reverse mortgage deal at the age of 60 and you live happily for 40-50 more years, you will not return a penny more than the value of your home upon sale or death.
Users also have the option to take the reverse mortgage in the form of a regular stream of cash instead of a lump sum. This is a very rarely preferred method, however