Advantages and Disadvantages of Reverse Home Loans
Just as the name suggests, reverse home loans are a standard mortgage, but in a reverse way. With a standard mortgage you can make regular repayments and eventually the loan gets paid off. According to home loan brokers Melbourne with a reverse mortgage, there is no requirement for you to make any regular payments to the loan. The lender simply adds on (capitalizes) the interest and other fees to the loan.
Reverse Home mortgages are available for people 60 years and over, against the equity in their home, holiday home or investment property Australia wide.
They are available for any purpose and do not require any repayments for the life of the loan. Basically, this type of loan does not have to be repaid until you choose to sell your home or the last surviving borrower passes away.
The title of the home will stay in your name and you can receive your money in a variety of ways to suit your situation.
Here Our Home Loan Brokers have enlisted some of the advantages comes with Reverse Home Loans:
- No monthly payments due during length of the loan. AII costs, e.g. interest and fees are due when the loan is paid off.
- It does not usually affect Social Security or Medicare.
- Income from a reverse mortgage is not taxable.
- The property value, not income is used to decide eligibility.
- You are able to receive payment in several different ways.
- If the property sells for less than the loan, Lenders cannot go to your heirs for repayment of your loan.
- Money can be used for any purpose.
- As the owner’s age increases and the home equity increases, the amount that can be borrowed increases.
Although reverse home loan has fair number of advantages, it is not free from prospective flaws.
Below are some of the disadvantages of this product
- Once borrower/s passes away, loan must be repaid before the title can be transferred to the borrower’s heirs.
- Interest is compounded and can’t be deducted from income taxes until repaid.
- As equity decreases in your home with each payment to you. you may not have enough equity left for future needs.
- Reverse mortgages usually only offer variable rates.
- Interest rates and fees may be higher for reverse mortgages than regular mortgages.
- Property owners still have to pay property taxes, insurance & maintain the home otherwise the loan could be terminated.
- When closing the loan, the mortgage must be paid off with your own money or from the reverse mortgage loan.
For more information, do feel free to get in touch with our home loan brokers Melbourne by calling 03 8370 3571, or making an online enquiry. Our staff will then arrange for a HH Finance loan specialist to make contact with you.