What are the benefits & potential negative impact of a reverse mortgage? A reverse mortgage is a charge upon your home and so is a “non-recourse” loan.
The primary benefit of a reverse mortgage is that it increases your income in retirement and allows you to stay in your home.
You retain ownership of your home.
It also has an impact upon the value of your Estate, as it will reduce the equity in your home, which will leave less for your beneficiaries.
You should address a Reverse Mortgage with your beneficiaries before committing to the same.
Expert Advice from our Legal Specialists
A reverse mortgage is repaid when the borrower dies, moves from the residence, or the property is sold.
A reverse mortgage increases your income in retirement. A reverse mortgage increases income, without increasing monthly payments, and allows you to stay in your home.
Key Points
The reverse mortgage is repaid when the borrower dies, moves from the residence, or the property is sold.
Fees, which can include the interest rate, loan origination fee, mortgage insurance fee, valuation fee, and various other costs, are high when compared with a standard loan. Costs are normally rolled into the loan.
There is a requirement to pay back the loan, if you permanently leave the home. eg to go to a Nursing home/Retirement Village. If you need to enter a Nursing Home, the loan would become payable. Namely, the timing of the Sale will not totally be within your control and you may need to sell when the market is depressed.
A reverse mortgage impacts upon the value of your Estate, as it will reduce the equity in your home, which will leave less for your Beneficiaries.
Prior to considering a Reverse Mortgage you should speak to the major Beneficiaries of your Estate, as they may be prepared to advance funds to maintain the value of their inheritance.
Expert Advice from our Legal Specialists
By making a Will you document who will receive your assets and belongings after you die. A legally valid Will allows an Executor to apply for a Grant of Probate.
Having a Binding Financial Agreement (pre-nup) provides advantages, a way forward for both parties in the event of a marriage or de facto relationship breakdown.
Marriage & de facto property and/or financial rights, need to be dealt with as soon as possible, to provide closure & to minimise anxiety, stress and costs.
Our dispute resolution specialists negotiate out of court settlements in family law and deceased estates such as disputed wills & inheritances disputes.
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