Reverse Mortgages are loans for retirees or pensioners that tend to be ‘asset rich’ but ‘cash poor’.
A reverse mortgage allows people aged 60 years plus to convert equity in their property into cash using the house as security. Like any loan, interest is charged and the borrower is not required to make repayments.
A reverse mortgage is secured by the registered mortgage over the borrower’s house (like any normal home loan).
Importantly, the borrower retains ownership and can stay in the house.
The interest is ‘capitalised’. This meaning that its charged back to the loan account and will compound over time until the person moves out of the house (unless voluntary payments are made).
For more information, go to https://www.seniorsfirst.com.au/how-reverse-mortgages-work/