Reverse Mortgage Australia

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Reverse mortgages: a gift for Australia’s ageing population?

Reverse mortgages have been every where in the media recently. Suddenly it seems that releasing home equity is THE solution for seniors facing lower pensions and possibly higher superannuation taxes, from a government under fiscal pressure. There was a great article published recently about this phenomenon. Even the Financial System Inquiry strongly suggests reverse mortgages as a way to support retirees’ cost of living and increase the activity of Australia’s overall financial system.

If you haven’t heard, reverse mortgage is a kind of home loan which allows you to draw money from your home equity. Unlike a regular home loan, reverse mortgage allows you to defer payment until you die, move out, or sell your home. For many Australians whose wealth is tied up to their home, reverse mortgage is a great way to tap home equity for extra funds that can be used for travel, aged care accommodations, or investment.

Why choose reverse mortgage?

In Australia, the government has legislated a no-negative-equity guarantee as a minimum requirement for all reverse mortgage providers. The government does that to protect borrowers and generally support the market’s efficiency. We are lucky because here in Australia because the market is heavily regulated with generally very good outcomes for senior borrowers.

With a responsible, regulated reverse mortgage industry Australian seniors at least have a viable solution to fund the increased longevity of an ageing population. This is important for pensioners and superannuants who are facing increasing pressures from government to fend for themselves, financially.

What do you think? Are reverse mortgages a gift for Australia’s ageing population?