A lot of people that get closer to the age of retirement or have already ended their working days are interested in getting a larger sum of money to chase their dreams or ideas from the past. Their age, however, is giving them trouble in getting a standard loan from the banks. That's why there are more reverse mortgage providers lately that offer loans to senior citizens.
But, what is reverse mortgage actually? For those that are not familiar with the term, here's a quick explanation.
When a senior citizen needs a larger sum of money for any reason, the first place they go to is the bank. There, they are explained that a standard loan is not possible because of their age. A different option is still possible, however, and it is a very popular choice lately for many people - it is the Australian reverse mortgages.
It works in a very simple way - the senior citizen that owns a property, preferably a house, signs a deal with the provider in which is stated that they get a sum of money they need, and in return, the bank gets a share of the equity of the house. The person getting the loan is not obligated to return the money until the property is sold or until they pass away.
The Australian reverse mortgages differ from one provider to the other but not too much. Basically, the terms are the same, but some providers might need the person asking for a loan to be over 60, and some will need them to be over 65.
Also, the interest over time might be different too. Some banks offer a smaller percent than others and that's why the person that is interested in becoming an owner of one of the Australian reverse mortgages, should make a good research and find the conditions that best suits them.
For example, if a person asks for a $100,000 AUD, and owns a house of $350,000 AUD, the bank will place the house under a mortgage but will only get a share of the equity after the house is sold. That share might be different in one bank and different in another. Also, as the time goes by, the interest gets bigger. It's not the same to get a 7%, and 7.3% interest on the house's mortgage. After a period of 20 or 30 years, this small difference between the numbers might become so big that you might lose a lot of money.
Some might say, "well why would I care what will happen after I die", right? Sure, but, the house will be sold and your children or relatives will get the rest of the money. You don't want to give more money to the bank than to your children, that's for sure. That's why you should look for the best reverse mortgage provider.
The good part in the reverse mortgage system is that the amount of the loan can never be greater than the value of the property - so if the provider asks for something else, remind them that the Australian government regulates this part of the agreement. Everything else is a matter of negotiating, so choose what's best for you.