Reverse Mortgages

[Francesca C]

Hi Everyone

I am 29 and in no need of a reverse mortgage :>, curious tho.. and yes, I have posted lots in the past 2 weeks, I slipped a disc so have been sitting around bored.

I was just reading some articles on Reverse Mortgages and how common they are becoming.

I know they take the age of the youngest applicant into consideration when figuring out the length of the loan and funds available..

To me it seems really risky.. and because it is becoming so common amplifies things... institutions are banking on the fact property prices are going to continue to go up? what about when property prices go down and sideways for 5 years... are banks going to hold the properties or just suffer the loss?

Can anyone explain?

 

[Rolf Latham]

HIya

The LVRs are so low that wed have to have a severe economic meltdown for the lenders to lose on the majority of transactions.

ta
rolf

 

[HandyAndy888]

I say banks due their due diligence, undervalue the property, than offer 70% of the LVR as a reverse...this way they are virtually guaranteed an income...who knew, banks are property investors....

 

[Peter_Tersteeg]

In many cases, reverse mortgage LVRs are 20% - 50%. You've got to be really old to get 70%.

There are other checks and balances in place. Use a provider who is a SEQUAL member. This guarantees that the lender will make the costs if you're ever in a negative equity situation. It also guarantees various codes of conduct for you.

Some lenders also have additional checks and balances in place, such as the events which trigger the sale of the property and interest rate caps.

 

[Francesca C]

Ah ok, I was thinking they where giving you 80% of the market value or something.

Thanks for clarifying.

 

[Bazza]

Personally, I like the concept of spending the kids inheritance. No point in dying rich! I always say to my kids that I will give them twice the amount of money that my old man gave me -> 2 x 0 = 0

Cheers,

Bazza