New reverse mortgage for seniors
A West Australian credit union has become the fourth lender to offer a reverse mortgage to cash-poor, asset-rich retirees. A reverse mortgage allows those who own their own home, but have little or no income, to use the equity in their property to fund a new car, home repairs, a holiday or just day-to-day living expenses.
StateWest Credit Society's Reverse Equity Loan is available to those over 65 to borrow against the value of their home without making repayments during their lifetime. Under a reverse mortgage arrangement, the loan is usually repaid when the borrower either moves or passes away. All interest, loan fees and charges along the way are added to the value of the loan.
The interest rate on StateWest's loan is set at 0.5 per cent above the standard variable rate and currently stands at 7.55 per cent.
“With an aging population in Australia, this loan allows many older Australians to provide for a more comfortable and independent lifestyle,” StateWest's chief executive Greg Wall said. He warned such loans require responsible management by borrowers and advised anyone considering this loan to seek independent legal advice.
Customers aged 65-69 can borrow between $10,000 and $100,000, subject to a limit of 15 per cent of the value of the property. Customers aged 70 or over can also borrow up to $100,000 but are limited to 20 per cent of the value. An application fee of $500 applies and $80 a year in ongoing fees. If the borrowers circumstances change, they can make repayments at any time without penalty.
For more on reverse mortgage loans, click here