Would you consider, Reverse Mortgage today!!

I just went through this article...


And, if you are willing to deliberately ignore, all the following factors,

i. Rates going to increase or decrease

ii. Markets going to boom or bust

iii. We are no longer the lucky or unlucky country

which are buzzing inside your ears. And constant reminders from press and digital media.

ARE YOU OR would you consider a REVERSE MORTGAGE TODAY??

Only those 55 or older need apply.

Some of the information in the article is not relevant to Australian regulations.

I aim to be in a position where I don't need a reverse mortgage to live comfortably in retirement.
I am to be filthy rich by the time I retire :D
Having said that, the future is impossible to predict. If circumstances were such that it was an expedient choice, I would probably consider it. I don't aim to have any offspring so bugger leaving any money behind :p
Definitely if I was aged 70 and sitting on a 3mil house today. Can't take it with me into the afterlife and too old to invest.
When you are at that stage in life it is something to consider. Nursing home care 24/7 isn't cheap if you can't qualify for a government funded bed.
The leverage is approx 30% of the value of the property at the maximum end.

Eg if your 55 years of age your lucky to get 15% of the value of your property.

Reason being that the compounding eventually will erode all equity after 10-15 years.

Australia has a "no negative equity" provision which means that if the debt is worth more than the house the lender cannot chase you or your children for unpaid funds on death.

There are also strict rules such as leaving the house/renting out/maintaining current condition.
There is much negative publicity about the reverse mortgage product, as well as incorrect perceptions.

Minimum age varies between lenders, youngest is 60 for one lender, 63 for another, 65 for a others and 70 for another. Most start at low LVR's of 15% but one will do 25% at 65. Maximum LVR would be 45% for a 90 year old. Lenders are not in the market to lose money or even have a slight risk of losing, with a no negative equity guarantee and a possibility of no repayments until death. As an example using a maximum LVR of 25% for a 65 year old at an annual growth of 1% pa, it would take 26 years to reach a no equity position. The life expectancy is 20 years for that age group.

An annual growth of 3% pa generally results in maintaining an equity $ position over 30 years similar to day 2.

My experience is that the kids (beneficiaries) are supportive of their parents having a lifestyle rather than worrying about what they may be left. There are many reasons why the RM may be suitable, some for repairs to the family home, some to supplement a pension to live a better than subsistence lifestyle, some to help their kids or grand kids, some to travel where they never have been able to before, some will invest to get a better return. For many seniors, superannuation was never an option or when it did come in, too small for their retirement needs so the PPOR is their superannuation and a RM is just a way to access it.

There are always options, downsizing (costly and may not be suitable), selling the PPOR or a share to kids (stamp duty and family dynamics), a loan from kids for instance. There are also ways to mitigate the compounding interest effects if it is a concern to beneficiaries.

One lenders will do a RM on an investment property, so it is not necessarily restricted to PPOR's. They are not an evil product. The federal government have their own version of a RM product allowing part pensioners to take up to the full pension using one.

With baby boomers coming into a retirement stage of life with mortgages, the pressure on government to balance the budget and reduce welfare expenditure (a recent tax NOA with a government brochure on breakdown of use of my taxes showed aged care number 2 expenditure item behind health care) and workforce percentage diminishing, I expect governments to start forcing use of PPOR equity to fund living expenses in the next decade if not earlier in some form or another.