Reverse mortgage report

ASIC has captured the experiences of those who have taken out a reverse mortgage.

Reverse mortgage borrowers are generally satisfied according to our ASIC report. But it also found in a report called All we have is this house that the complexity of reverse mortgages and the fact that they are unlike any other financial product could be potential risk factors for future borrowers.

Many people are unfamiliar with what a reverse mortgage is and have difficulty budgeting for long-term with large credit available to them. Also, it can be tricky estimating how much equity might be available in the future.

The report also found that there is a general reluctance to anticipate the impact of declining health on their finances and children can put pressure on parents to lend or give them money through a reverse mortgage and this may be an inappropriate use of the loan.

ASIC says it’s important to know how much the loan is likely to cost you over time and to know the consequences should you breach a condition of the loan. It’s a timely reminder to remember that your financial needs might change over the next 10 or 15 years and to look forward more than 3 or 5 years.

ASIC believes reverse mortgages can be a useful product but warn people that they tend to have unusual features and there is a need to be vigilant with budgeting and planning to ensure you make the most of your reverse mortgage.