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.
