Reverse Mortgages often have a reputation for eating up a family’s equity and diminishing your child’s inheritance. This is a concern for clients when taking out a Reverse Mortgage, however, we have found in the current Australian property market when used responsibly, the opposite is true.
We recently heard from a client in the Northern beaches. This couple took out their first Reverse Mortgage in 2007, they have done several refinances since. In 2007 their house was worth $750,000, and they had a choice to either sell and buy in a retirement village for $500,000 or take out a reverse mortgage to supplement living costs. If the had of sold and bought in the retirement village, they would of had $200,000 left to put in the bank after all other fees and charges. Over the next few years, they would have had to lived off the pension and savings. Once the savings had run out, they would have been left to scrimp and save as you cannot get finance on a retirement village property. They would have only been able to leave their children the $500,000 from selling the retirement village property.
Fortunately, the couple chose to do a Reverse Mortgage. The couple have now spent $215,000 on their Reverse Mortgage facility, taking a thousand a month to supplement income and drawing down covering one off large expense. They have accrued interest of $275,000 for a total cost of $490,000. This alone sound expensive, but their property is now worth over 2.5 million dollars, and they have enjoyed a far higher quality of life.
The clients’ children will now go on to inherit over a million dollars each instead of having the split half a million dollars between the two of them.
For more information on how a Reverse Mortgage can help you please call our Reverse Mortgage Specialist in your state.