How Does A Reverse Mortgage Work In Australia?
When you're a senior citizen it's really hard to get a standard loan from a bank. The banks have this policy in which senior citizens are considered risky for not paying their loan in full. If you're a senior and asked for a loan, you know how hard it is to get a standard loan.
Today, things are not looking so bad for people that finished their working days and want to enjoy their life in peace. Banks of Australia invented this model that offers a lump sum or monthly payment to seniors in return for the property they own. It's called reverse mortgage. So what really is and how does a reverse mortgage work in Australia?
The question how does a reverse mortgage work in Australia is really easy to answer - flawless - but before you get one, you need to learn all about it. The first thing you need to know is if you meet the minimum conditions for the loan. The minimum age that's required is 60 years of age, but you'll probably have a really hard time finding a bank that will let you get a reverse mortgage on this age. Most banks will require a higher age, and some even as for more than 65 years.
Another thing is that you need to have a property on your name. A house or maybe a company, something that the bank will put a mortgage on. And that's basically it. After you sign the deal with the bank, you agree to give an equity of the shares of your property to the bank but the mortgage won't be activated ever or at least until you decide to sell that property. The bank is ready to give you the loan and will get nothing in return until you're alive or you decide to sell.
Of course, as time passes the interest will become higher but the bank can never get more than the value of your property. This is regulated by the Australian Government, which guarantees that you won't get robbed by the bank. If you decide to sell after 20 or 30 years, the bank will get a share of the sale and that's why it's really important to find a bank that will offer a reverse mortgage deal with the lowest possible rates. You might not be planning to sell now, but who knows what will happen after 20 or 30 years, so be prepared.
You can choose between a lump sum or monthly payment. Some prefer the first way because they want to spend it all on dear dreams, travel, buy a house on the beach or invest in something bigger, and some like the monthly option. This option is better for many people because they realized that living from the government pension is simply impossible for them. This way they get enough money for a decent senior life. At the same time, they aren't obligated to return anything until the end of their life and this is simply amazing.
So, how does a reverse mortgage works in Australia? As we already said - flawless.