ABC Reverse Mortgage Report
On 5 December 2018 ABC’s 7.30 program ran a story on reverse mortgages and posted an article on www.abc.net.au. A link to the article is here.
The 7:30 report focuses on two cases of customers with reverse mortgages who are not pleased with the outcome.
While these are not Heartland customers, we wanted to respond to some of the matters raised in the report. Firstly, we would like to acknowledge the challenges that the families have been through and are going through. These are unfortunate and distressing situations, which we believe are unacceptable.
The cases featured related to loans that were written in the mid 2000’s, before the introduction of tougher responsible lending obligations in 2009, and specific reverse mortgage regulations which followed. Reverse mortgages are now one of the most heavily regulated consumer finance products in Australia.
One case suggested that the customer did not receive appropriate legal advice before taking out the loan. This simply could not happen with Heartland. We require all customers to receive independent legal advice, and this was mandatory even prior to the introduction of these regulations.
Mandatory independent legal advice is just one of the steps Heartland takes to ensure our customers make an informed decision. Other steps include encouraging all customers to speak to their family and getting them to attest to this, or providing a reason as to why they have chosen not to. All customers are also provided with projections to show the impact of the loan and its compounding interest on the equity in their home under a variety of scenarios, and asked to consider alternative options, such as downsizing.
Heartland also provides considerable protection, including Lifetime Occupancy and a No Negative Equity guarantee, which guarantees that the amount required to repay the loan will never exceed the net sale proceeds of the property.
The report also featured a couple who incurred break fees (a large penalty) to repay their loan, due to having a fixed for life interest rate. Heartland only offers a variable interest rate, which provides our customers with the flexibility to repay their loan, in part or in full, at any time without penalty. Heartland has never offered a fixed for life interest rate, and believes they should be banned (no current providers offer them). Heartland believes that flexibility and customer protection, along with a thorough application process that ensures an informed decision, is critical.
A reverse mortgage is just like a regular home loan that has been tailored for the needs of seniors with no regular repayments required, and considerable protection and flexibility. The loan, including interest, is repayable when the customer decides to sell the home and downsize or when they leave the home.
With a quality product and a thorough process, a reverse mortgage can help seniors live a more comfortable retirement, with independence and dignity. The impact can be genuinely transformational, providing peace of mind and the ability to continue living in their home, which is often what connects them to their family, friends and community.
Regarding ASIC’s review of reverse mortgage lending, ASIC Deputy Chair Peter Kell stated “reverse mortgage products can help many Australians achieve a better quality of life in retirement”.
This mirrors Heartland’s experience where we have assisted over 15,000 seniors live a more comfortable retirement with our reverse mortgage. This was also validated in a recent customer survey, where 96% of respondents said that they would recommend Heartland to friends and family, and 94% would recommend taking out a reverse mortgage. Feedback from our customers can be found here.
At Heartland, we take our duty of care for customers seriously, and recognise the trust they place in us. If you would like further information or have any questions, please don’t hesitate to contact our friendly team on 1300 889 338 or [email protected].
Information provided is accurate as at 6 December 2018 and may change from time to time.