There are a couple of simple things you can do to ensure that your reverse mortgage loan is working for you as efficiently as possible:

• Draw the funds out slowly, or gradually over time. This will reduce the ultimate interest bill. With some lenders you can do this via monthly instalments paid directly into your bank account
• Make payments to reduce the loan balance or interest bill, if you can afford it
• Make sure you have enough ‘cash reserve’ available for future use. If you have not established sufficient cash reserve (undrawn funds) at the outset, you may have to pay ‘top-up fees’ to the bank if you run out of money and need to go back for more. Why pay more bank fees than you need to?
• Avoid lenders with regular, or monthly fees

To check your reverse mortgage go here.

In Australia, as long as you own your own home you can get a reverse mortgage from as young as 55, however at that age you would be restricted to just 10% of the home value. As you grow older each year, you can get usually get a an extra 1% of the home value (depending on the lender).

For instance,  if you are 70 years old you would be eligible for 25% of the home value. For further assistance on whether you qualify and how much you could get, go here. 

There is no single, easy answer to this question. All of the banks and lenders who provide reverse mortgages in Australia have different rates, fees and product features. The best lender for you will be determined by your specific needs. For example: if you are seeking a 3 year fixed rate, only two lenders in the market offer this option.

Sometimes the cheapest option may not necessarily be the best solution for you. Other factors can come into play: is my lender safe? Will my cash reserve funds always be available for future use? Is the ‘No Negative Equity G’tee’ rock solid? Also, the best lender for your circumstances may be very different from the lender that is best for your friend. It’s a personal thing. In any case it’s very important you get good information and help from an independent source, such as Seniors First.

However, rates are important. There is currently a big difference in the interest rates charged by the banks, and choosing the wrong lender can end up being a very expensive mistake. To check your loan, go here.

If you’re thinking about a reverse mortgage, then your best source of information and assistance will be someone who has completed the SEQUAL accreditation. If they’ve done the course and gained the accreditation, they will have a good understanding of all the issues surrounding these loans and should be able to show you how to save many thousands of dollars in interest.

Indeed, the Mortgage & Finance Association of Australia and all of the SEQUAL lenders now make this a mandatory requirement for any finance brokers who wish to offer reverse mortgage products to consumers. Be sure to ask your broker if they are SEQUAL accredited. If they are NOT, seek assistance elsewhere immediately.

When establishing a reverse mortage, it is usually a good idea to provision for your future needs within the loan structure as well. In addition to borrowing a lump sum for your immediate needs, you can often also set up a ‘cash reserve’ or ‘line of credit’ that can act as an emergency fund for future use.

In this way you can avoid ‘top up’ fees that the banks will charge if you have to formally request additional funds in future. There is no interest charged on the money in the cash reserve that don’t use.

Reverse mortgage lenders in Australia require that the security property for a loan is a residential house. Although some lenders will accept investment properties and holiday houses, most only accept the main owner occupied residence of the borrower(s).

Rural properties greater than 10 hectares (25 acres) are usually not acceptable, nor are commercial or industrial premises.

One bank however will lend up to 50% of the property value against investment properties regardless of age. For more information go to Seniors First

This is a very common question at the moment given the current turbulence in financial markets. Whilst this is an individual choice, there are a couple of key points to consider:

• Don’t fix your loan for too long if you think there may be a chance you could sell or pay the loan out early - you could incur substantial pre-payment costs otherwise
• All line of credit options or ‘cash reserves’ must be variable interest
• Some lenders allow you to fix any portion of drawn funds at any time
• Many lenders allow you to ’split’ your loan into fixed AND variable portions so that you can effectively hedge your risk

If are unsure if you are making the right decision with your loan structure and would like some help, go here. 

All reputable equity release lenders will insist that you obtain independent legal advice as part of the transaction. Indeed, you will not receive any funds until advice has been signed-off by your solicitor. This is of course a good thing: it protects you from potentially entering into an agreement that you don’t understand. All SEQUAL lenders abide by a strict code of conduct that demands this as a requirement for membership.

However, many people do not realise that this requirement also protects the lender. Independent legal advice is the best way they have of guarding against any possible mis-selling by dodgy mortgage brokers. It also ensures the lender’s legal position is sound in the case of any possible future dispute with the borrower or their estate.

If your lender is not asking for you to obtain legal advice, you should really question their credibility. Check your lender here. 

If you have an existing loan through one of the major banks, chances are you’re being charged a monthly fee of $10 or $12. This is an absolute scandal!  

These fees will quickly attract interest and you’ll eventually be charged compounding interest on bank fees. Outrageous.  If you go with a lender who charges monthly fees , over the life of the loan you’re likely to pay many thousands of dollars in unnecessary interest.

Are you paying too much? Check your loan here. 

This is a special feature that many reverse mortgage lenders offer where you can effectively quarantine a portion of your equity for children or beneficiaries. By borrowing less than you are eligible for, you can ensure that your heirs will receive a pre-determined amount of the equity regardless of what happens to the loan balance or property prices in future.

 Eg; Let’s say you are 70 years old and have a house worth $300,000. You would be eligible for a maximum of $75,000.  If you chose a Protected Equity Option of 20%, you would only be able to borrow a maximum of $60,000, however you would ensure that your beneficiaries received 20% of the future sale price of your home, regardless of the loan balance at that time.  

Although this feature is currently not that popular amongst borrowers, it’s a handy option. Borrowers in remote and regional areas, where house prices may not grow as strongly as those in the city, may be wise to consider this option when establishing a reverse mortgage.