What is a reverse mortgage?
You could use the equity from your home to free yourself from financial stress.
How does a reverse mortgage work?
A reverse mortgage is like a normal home loan that allows retirees to release some of the equity in their property. Importantly, you can continue to own and live in your home for as long as you wish while enjoying the benefits of the community, social networks and family memories it provides.
What are the benefits of a reverse mortgage?
Continue to enjoy the comforts of living in your home for as long as you choose.
Remain the owner of your home, benefitting from any potential increase in property value.
Funds can be used for almost anything that helps you live a more comfortable retirement.
No repayments required, as the debt can be repaid from the future sale of the property.
Variable interest rate allows you to make voluntary repayments if you choose to.
You and your estate are protected by a no negative equity guarantee.*
Flexible drawdown options, including lump sum, regular advances, and cash reserve facility.
*Subject to complying with the terms and conditions of the Heartland Reverse Mortgage, you will not owe more than the net sale proceeds of your home and you can keep your home for as long as you choose. There is no assurance that property values will increase over time, and property values may also decline.
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Reverse mortgage costs and
There are some things you may want to consider before taking out a reverse mortgage.
- Reverse mortgage interest is calculated on the daily balance outstanding and added monthly to your loan account, meaning your loan balance will increase over time.
- Once you move permanently from your home, the entire loan balance will be payable within 12 months.
- The amount of equity you can draw down is determined by your age, property value, and other loan approval criteria.
- Drawing funds from your property now can reduce what you could potentially access later on.
- Variable interest rates mean that there will be changes to what you are charged over time.
- There are fees and charges for setting up the loan, depending on what options you select.
We are often asked how a Heartland Reverse Mortgage adds up over time, and how much equity will remain in the property when the loan is due to be repaid. This depends on several factors including interest rate, house price growth and term of the loan.
Jo and John own their own property valued at $500,000. When they were both 70 years old, they began looking into reverse mortgage options and applied with Heartland. The maximum amount available to them is $150,000. Initially, they chose to draw down $50,000 for home improvements, and set $100,000 aside in a cash reserve facility in case they needed it in the future. The cash reserve was never drawn, meaning interest was never charged on that amount.
The graph below shows what could happen to their equity over time. As you can see, while the loan debt increases, so does the value of their property, and the amount of equity increases as a result.
In dollar terms, Jo and John could have more ‘net equity’ after 10 years than what they did before the loan, about $541,880 of the home value.
After 15 years, when they are both 85 years old, there could still be $570,207 remaining.