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Reverse mortgages
There are a number of advantages and disadvantages of signing up for a
Reverse Mortgage. Here are a few of both sides of the story and some
important contacts:
Advantages;
Reverse mortgages let you free up money to maintain or
increase your standard of living. They would would be an option for
'asset rich, cash poor' retirees as they can tap into their biggest asset, their
home, to go on holidays, buy a new car or to simply fund everyday living
expenses
Borrowers can continue to live in their own house until they die or move
homes permanently and allow you to keep your financial independence
There are no repayments required until you die or sell the home. They fall
within the consumer protection provisions of the Australian Securities and
Investments Commission.
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Most products have a 'no negative equity' guarantee which means you won't end up
owing more than the value of the home or be rendered homeless if its value
drops.
Their increasing popularity means more providers are offering them so the market
is becoming more competitive.
Disadvantages;
The interest charged is about 1 per cent higher than a standard variable rate.
The loan may limit your options in the future. You must be of retirement age to
qualify.
Reverse Mortgages may reduce the value of your estate for your beneficiaries.
They are not covered by the Financial Services Reform Act and may affect your
eligibility for Centrelink payments.
S.E.Q.U.A.L.
Before entering into any Reverse Mortage, check if the lender is a member of
SEQUAL.
Senior Australians Equity Release Association of Lenders (SEQUAL) is a not
for profit association supported by Australia’s leading providers of Equity
Release products. Launched in January 2005, SEQUAL has received positive
feedback from respected seniors and Government organisations. A voluntary
code of conduct applies to members.
The primary objectives of SEQUAL are fourfold:
1. To provide members with a forum for collaboratively and ethically developing
the Equity Release market in Australia, with particular regard for issues
previously experienced both overseas and in Australia
2. To provide a transparent Code of Conduct by which members of SEQUAL are
expected to comply, for the protection of consumers
3. To provide a central body for lobbying industry stakeholders and Government
bodies
4. To provide a central source of information to consumers on the product
category, including the sources of independent information that are available on
Equity Release options, and access to SEQUAL members.
www.sequal.com.au.
A reverse mortgage is designed to stay with you for the rest of your life (or
close to it), so you need to know exactly what you’re getting into. The loan
contract must be in plain English, crystal-clear and contain fair and reasonable
conditions that don’t place you under excessive risk. In some circumstance it
may affect your pension
For more information contact a Centrelink Financial Information Service Officer
on 13 23 00.
N.I.C.R.I.
The National Information Centre on Retirement Investments (NICRI) is a free,
independent, confidential service which aims to improve the level and quality of
investment information provided to people with modest savings who are investing
for retirement or facing redundancy.
Gathering information to make an informed investment decision can be difficult.
Relevant information is not always readily available or available at a
reasonable cost. Keeping up to date can be difficult as the investment industry
is constantly changing with new investment products continually becoming
available. Changes not only occur to investment products but to legislation,
social security and veterans' affairs rules and taxation laws.
The role of NICRI is to help provide up to date independent information to
assist people to make the best possible investment decisions they can.
NICRI does not give investment advice, recommend financial products or planners
or undertake casework. If you require further information on redundancy or any
investment products please contact NICRI on freecall 1800 020 110 or write to PO
Box 893, Woden ACT 2606. You can visit their website at
www.nicri.org.au
You may also want to visit A.S.I.C., Australian Securities and Investments
Commission. You can visit their website at www.fido.gov.au
Choice Magazine rated 17 reverse mortgages against six consumer-protection standards.
Only six out of 17 met the Choices conditions of Good consumer protection
contracts:
Newcastle Permanent Build Soc
www.newcastlepermanent.com.au
ABN AMRO
www.abnamroreversemortgage.com.au
Mariner
www.marinerretirement.com.au
Suncorp
www.suncorp.com.au
Vision Equity Living
www.visionequityliving.com.au
CBA
www.commbank.com.au
The Financial Planning Association of Australia Limited
You may want to speak to a Financial Planner to get some independent
financial advice before entering any agreements. The Financial Planning
Association of Australia Limited (FPA) is recognised internationally as the peak
professional organisation representing the financial planning sector in
Australia. To find a planner call Freecall 1800 626 393 or visit their website
at http://www.fpa.asn.au/
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