It's time to think in reverse

It might not be a subject we like to spend too much time thinking about, but we’re not getting any younger as a nation, and aged care is becoming more and more of a reality for many Australians. 

And much sooner than we’d like!

Therefore it’s important you start preparing and considering your options well before the time comes, so that when that next chapter of life commences, you are ready and comfortable with what can be a difficult transition for some.

There’s a common misconception amongst the elderly and their families that you will have to sell your home (if you’re lucky enough to own one) to fund the hefty cost of aged care.

Of course, this scenario might be the best move for you or your loved ones. But selling your house is not the only option available to you when it comes to funding aged care.

Personal Finance expert and Daily Drive regular, Noel Whittaker, explained recently in the Sydney Morning Herald that there is another alternative available to you. That being the concept of: reverse mortgaging.

So just what is a reverse mortgage and how does it work?

A reverse mortgage is a type of home equity loan for older homeowners. It is also known as a home equity conversion mortgage, or HECM. It does not require monthly mortgage payments and the loan is repaid after the borrower moves out or dies.

Debt can generally be divided into long-term and short-term loans, both commonly offered under a mortgage arrangement. Short-term "downsizer" finance is typically a lump sum to fund the purchase of a retirement village unit whilst long-term finance could fund a lump sum or regular payment, with the view that your former home will be retained and the debt repaid when you die.

As Mr Whittaker explains: “Unlike a normal mortgage, where you need both the asset to back the loan and the income to service it, a reverse mortgage doesn't require you to make repayments until a later date or the end of the loan. It is important to be aware of the effect that the capitalisation (compounding) of interest has on your debt position. Compound interest is a great tool for saving but a real burden for debt.”

Mr Whittaker also stressed that it is important to note that interest rates for these types of loans are higher than general mortgage rates and that borrowers need to be extra mindful of the interest rate charged by the lender before committing to any agreement.

SPECIAL OFFER RETURNS:

As a valued FiftyUp Club member you can once again take advantage of our Reverse Mortgage special offer with Heartland Seniors Finance.

Simply click here now to see how much you could borrow.

FiftyUp Club Pty Ltd (ACN 166 905 175) is a Corporate Authorised Representative (AR number 465649) of One Big Switch Pty Ltd (ACN 150 963 474) who holds its own Australian Financial Services License (AFSL 455982) and can provide you with factual information and general advice only, that is advice that does not take into account your personal objectives, financial situation or needs.