Kathy Swan from the ABC’s Inside Business program recently had a look at Reverse Mortgages:
Something very odd is happening in the world of property-based borrowing. Rather than the young looking for their first home, it’s the parents and grandparents who now represent the fastest growing segment in the market. A study released this week found that older Australians borrowed $560 million through reverse mortgages on their home last year, almost double the figure for 2005 … there are some serious risks for the new wave of elderly borrowers.
The family home is fast becoming the new cash cow for cash-strapped retirees, thanks to what’s called reverse mortgages. They’re not new but they’ve never been so popular. That’s because retirees can turn the value of their biggest asset, their home, into money they can spend now without selling up and moving and without having to pay anything back until they do actually move or die.
What Swan found is that people considering Reverse Mortgages need to make sure they are aware of all the risks and this was backed up by a recent report on Reverse Mortages by Choice Magazine as reported on ABC radio:
A new report is warning that retired people can risk losing their homes when they sign up for so-called reverse mortgages.
Reverse mortgages let older homeowners borrow against the value of their property to top up their income.
But an investigation by the independent consumer watchdog, CHOICE, has found that mortgage brokers are encouraging people to take out loans for more than they need.
And it’s found serious problems with loans from even mainstream banks.
Some had default clauses that could be triggered by minor oversights such as failing to pay the rates….
You can watch the Inside Business story “Reverse mortgage trend brings risks for borrowers” by playing the Video (6 minutes in length)
If you can’t see the video player than you should open this URL in Windows Media Player: