Swinging singles spend up big on the house
No longer content with a retirement peppered by bowls and bus trips to the pokies, the new generation of retirees is opting for a more lavish lifestyle and using their homes to fund it all.
The emergence in the past few years of reverse mortgages has opened up a new world of freedom to cash-strapped retirees. Basically, a reverse mortgage is similar to a traditional mortgage, except that there is no requirement to pay the money back until the house is sold, the owner goes into care or dies.
Needless to say, the popularity of reverse mortgages has grown, with the majority being taken out by swinging seventy year olds. According to statistics, these are most often couples, with single females close behind. Single males are least likely to sign up to a reverse mortgage.
There are many reasons retirees unlock the equity they have in their homes. Some opt for a lump sum to fund a holiday, a new car or renovations. Others take their drawdown in instalments to boost their living income up to the level they prefer. Whatever the reason, there are now over 30,000 properties re-mortgaged and the sector keeps growing.
Before you rush out to cash-in the family home, RateCity advises that you do your research, including reading the CANSTAR CANNEX reverse mortgage star ratings report, plus talk to a financial planner. As with all financial products, there are things that can go wrong if you are unprepared.
Always look for a reverse mortgage with a No Negative Equity Guarantee. The quality products CANSTAR CANNEX has star rated all have this feature which basically is a guarantee that the loan will never exceed the value of the property. In other words, the occupants can never be evicted and cannot leave a legacy of debt to beneficiaries.
Some lenders also allow you to protect a portion of the home's value upfront so an agreed percentage of the value of your equity is permanently reserved.
Be mindful too of the effects of compound interest. With no need for repayment, lenders will simply capitalise the interest charged to the loan. For example, with current rates around 9%, a $50,000 loan will grow to over $120,000 after 10 years
It is also interesting to note that 10% of all reverse mortgage holders pay off their loans in full so the product can also be used to fill a gap in funds for any particular reason.
By the way retirees have been taking up the option of a reverse mortgage, there is a definite need for this product.
How do I compare reverse mortgages?RateCity is the best website to shop around on for over 2000 home loans and most other financial products. At RateCity, you can use expert comparative data from CANSTAR CANNEX, Australia's leading financial research and ratings firm. CANSTAR CANNEX has analysed and evaluated hundreds of products to award five stars to only the very best. The CANSTAR CANNEX star ratings go much further than just looking at interest rates. They also take into account important features so you can be confident you are getting the best product.
Use our easy search tools to compare reverse mortgages at RateCity.
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