Friday, December 24, 2004

Reverse Mortgage Information

Visit our Reverse Mortgage web-page:

"Features of Reverse Mortgage Loans

The Reverse Mortgage enables people over 65 to borrow funds using the equity in their home, while still being able to live in the home. If the borrower moves out of the home or dies the loan becomes due.

Most Reverse Mortgages have a variable interest rate about 0.5 - 1% higher than a standard mortgage. Especially in an environment of rising interest rates, borrowers need to be aware that the compounding effect of interest charges and fees capitalising can cause the loan to balloon to unforeseen levels in a very short period of time. For example, at an interest rate of 8% per year a $50,000 loan could become $86,000 in 7 years or $108,000 in 10 years. At 9% a $50,000 loan would become $92,000 in 7 years and $119,00 in 10 years.

If interest rates rise by a further 2% over 10 years then a $50,000 debt becomes an $162,000 debt. At a 4% increase, $50,000 becomes $177,000. It is not difficult to see how some US and UK retirees have lost their homes through similar mortgage schemes.

Some of the features of a typical Reverse Mortgage home loan include -
maximum amount is usually 11 - 45% of valuation
usually required to be taken as a lump sum
may allow you to redraw funds
can be used for any purpose
extra repayments allowed "