If you're a senior citizen, or you're close to that age when people are getting retired, then someone probably talked with you about that amazing loan plan that's called reverse mortgage. If you know what it is, then you probably know how good it is, but what you probably don't know in details is how much you need to be aware of the reverse mortgage fees that are applied to the loan.
First, however, let's explain what is a reverse mortgage and then we'll explain why reverse mortgage fees are important.
The reverse mortgage plan is made for people that are retired. This means you can't get this kind of loan if you're under the age of 60, and in some banks, you probably won't get a loan if you're under 65. With the plan, seniors are able to get a loan that they are not obligated to return until the end of their time. In return, the banks get an equity of the shares of the property that the person asking for a loan owns. This actually means you won't need to return any money, but when you decide to sell, or you pass away and the house is listed for sale, the bank will get a share of the amount.
When the house is sold, a part of the money ends up in the bank, and the rest goes to the owner or to the family of the person that passed away. You don't want to give extra to the bank if you can get the money for yourself or for your family. This is where reverse mortgage fees come into play and this is why it's important to know everything about them.
First, it's important to know that no matter how much time has passed and what are the rates you agreed on, the value of the property can never exceed the amount the bank will receive. The Australian Government guarantees this part. Then, you can focus on the interest rates. It's better to have lower rates and even a 0.01 percent can make a change. Let's say your house is worth $400.000. If you place this kind of mortgage on your house you'll have to look for lower rates because it's not the same to agree on a 7.4% interest and 7.5%. Over time, this change can cost you as much as $20.000.
This is practically the only thing you need to worry about when you're getting a reverse mortgage. There are no other fees you need to worry about. Everything will be regulated by the bank and you only need to sign the papers. That's why everyone is happy about this plan that's offered to seniors. No other loan is available for these age group, but why would anyone want a loan on different terms? The reverse mortgage plan has no additional fees and the person asking for one shouldn't worry about anything until the end of their life.