Why is Equity Conversion Mortgage a Great Idea?
An equity conversion mortgage, also known as a reverse mortgage is a great idea for people who need money at the moment, have property, but are not suitable for getting a loan from the banks. People over the age of 60, that are about to, or have already retired, can apply for this kind of loan from banks that are open for giving them a loan without asking for monthly payments.
The equity conversion mortgage actually means that a person will get a loan from a bank and for return will make a deal in which an equity of the shares of a certain property will sign to the bank. That means they won't need to care about returning the debt until their life, or until they decide to sell the property that now has a mortgage placed on it.
This is a great idea for everyone that would like to finally travel around the globe, move to a more exotic place and spend the rest of their life there, or, for those that can't put the work and the business aside, this is a great way to make investments and continue their working life although they are officially retired.
The only thing you need to have in mind is that the money you borrow will eventually be returned to the bank. This might be after your death, or after you sell the property, but the money will eventually be returned. This being said, you need to be aware of the fact that the banks have an interest that might be higher or smaller depending on the bank. Make sure you get a good deal in order to be sure that the bank get less money and the person inheriting the property gets more. Also, you never know how long you're going to live, you might decide to sell the property at 95, and it will be better if you can get more from it.
The good side of the interest is that the amount you'll eventually need to return to the banks can never exceed the value of the property. The Australian Government has placed a regulation act in which a person can never owe more than the property itself, which is great.
There are two options when it comes to borrowing money with the equity conversion mortgage plan. You can either get a lump sum or get monthly payments. The lump sum is a large amount of cash that is best for investments or travels, and the monthly payments are just another form of continuing the salary system that a person is used to.
Returning of the loan is exactly the same, but the lump sum method is more suitable for some, and not so much for others. Some prefer the monthly payment because they want to continue living the lifestyle they're used to. Whatever choice you make, be sure that you won't need to return a single cent until you decide to sell, or you pass away.