Things to look for in your reverse mortgage provider
One of the most important decisions you’ll make about a reverse mortgage loan is which lender to choose. This decision may have a long-term impact on you and your family, so it’s crucial you get this right.
What to look for in a reverse mortgage lender? Keep these eight things in mind.
You should be comfortable with your decision to borrow a reverse mortgage loan. Find a reverse mortgage lender who offers lifetime occupancy
so you continue to enjoy any increase in property value. The presence of a ‘No Negative Equity Guarantee’ and the requirement for independent legal advice indicate that the provider is a genuine reverse mortgage lender.
Ideally your reverse mortgage provider will offer different draw down options to cater for every need; a lump sum up front, regular ongoing advances (monthly, quarterly or annually), and a ‘cash reserve’ facility for future access to funds.
Most reverse mortgage providers in Australia are not specialist lenders. If you are a borrower who values quality customer service, you might consider a specialist lender who understands the particular needs of people over sixty. Better still, look for a lender who demonstrates a passion for changing the lives of Australians.
Search for a reverse mortgage provider with flexible criteria when it comes to minimum age, Loan to Value Ratio as well as minimum and maximum loan amounts. This can be important as some reverse mortgage lenders have caps on how much home equity can be released for cash.
Your circumstances can change at any time. So it’s important your reverse mortgage lender does not require regular payments but still allows you to make repayments if you wish. Reverse mortgage debt is usually repaid from the future sale of your property so ensure your lender allows this without any penalty.
Look for reverse mortgage lenders who offer an Equity Protection Option
. This feature allows you to protect a percentage of the eventual sale proceeds of your home (you or your estate are then guaranteed to receive a minimum of the sale proceeds upon repayment and discharge, regardless of the future property value or loan balance).
Some reverse mortgage lenders provide an option for you to use a secondary property as security, such as a holiday home or investment property. If you own more than one property this can be a useful feature.
Some reverse mortgage lenders will not provide funding where the borrower no longer resides in the home. This can be a real problem for those already in a nursing home, or people who may need aged care in future. Check that your lender offers an aged care option.