In the last two years, the popularity of reverse mortgages has grown enormously.I was looking at some Australian statistics yesterday and in Australia, almost $900 million worth of loans written in 2008.
The trend in Australia follows huge success that lenders have had with the concept in both the UK and USA..The trend is set to continue as more retirees become cash poor.
The way a reverse mortgage works is quite simple
The loan once established requires no payments to be made by the retiree until one of the following events happens.
1. The borrower sells the property
2. The borrower(s) decide to move into an aged care facility
3. The borrowers pass away.
Why is there a need for Reverse Mortgages?
The reverse mortgage concept came about because of the amount of cash poor retirees having to sell the homes to live. Most of these people owned or had very significant equity in their principal residence but were quite cash poor.
The best part about a reverse mortgage is that the borrowers have no restrictions on what they use the money for. Whether they want to use the money to travel or give their grandchildren money for university they have choice.
The truth is that if someone needs a reverse mortgage it is mainly because of insufficient funds to live without regular income. Some would say they have not allocated their money well enough.
In truth their can be so many reasons that a retiree needs to consider a reverse mortgage including health reasons that called for an early retirement.
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