Freedom to live: How a reverse mortgage could help create a more comfortable retirement

This is sponsored content for Heartland Seniors Finance.

It's highly likely you might have heard of reverse mortgages. They are an option available to seniors to assist them financially in their retirement that has been growing in profile and popularity.

But how exactly do reverse mortgages work and how could they help you meet some of the financial challenges ahead, allowing you to live as fulfilling and stress-free a retirement as possible?

If you own your own home but are concerned the savings you've built up may not be enough to finance the kind of retirement you were hoping for, then a reverse mortgage might be the solution.

Fundamentally, a reverse mortgage is like a home loan but one that has been designed specifically for seniors.

In practice, it allows people aged 60 and over to release the equity in their home, letting them access funds to manage any financial needs they have. The amount you can access depends on your age and the value of your home.

Unlike a home loan, you aren't required to make regular payments because the debt is eventually repaid from the future sale of the property. (However, you have the choice to make repayments if you would like to).

Importantly, a reverse mortgage allows you to continue to own and live in your own home for as long as you want, enjoying all the benefits that come with that, like retaining your community connections and social network and avoiding the hassle and stress of moving.

It also means you continue to benefit from any increases in your property value.

Jeff Murray, Head of Distribution at Heartland Seniors Finance, said that with the right advice and approach reverse mortgages provide an effective way for people to help finance a better retirement, and provide the peace of mind that comes with knowing money is there if needed.

"Reverse mortgages are very flexible and can be used to fund any number of worthwhile purposes," Mr Murray said.

"It really could be anything from funding a family holiday, doing some home repairs or improvements, or repaying debt to paying for medical procedures, a new car, assisting with in home care, or just extra cash flow to help with bills and living costs."

"You can choose to receive your reverse mortgage loan amount as a lump sum, regular advances, a cash reserve facility (similar to a 'line of credit') or a combination of all three. Whatever suits your situation."

Reverse mortgage interest is calculated on the daily balance outstanding, and added monthly to your loan account. If you choose to make repayments you can reduce the balance and the interest charged.

The total loan amount, including accumulated interest, is repayable once you move permanently from your home, which could be when you sell your property, move into long term care, or pass away.

Mr Murray said a key appeal with reverse mortgages is the customer protections guaranteed by the strict regulations surrounding them.

"With a reverse mortgage people continue to own 100 per cent of their home and their home will remain the place they live for as long as they choose," he said.*

"There is also a no negative equity guarantee which means the amount required to repay the loan will never exceed the net sale proceeds of the property."*

"Reverse mortgages are arguably the most heavily regulated consumer finance product in Australia."

*Subject to complying with the terms and conditions of the Heartland Reverse Mortgage, you will not owe more than the net sale proceeds of your home and you can keep your home for as long as you wish.

Every situation is different. This information has been prepared without taking into account your needs, objectives, or financial situation. If you are considering a reverse mortgage, Heartland Seniors Finance encourages you to understand how it may affect your personal circumstances - talk to friends and family, speak to professionals, and use the resources and tools Heartland Seniors Finance has available.

Loans are subject to loan approval criteria. Terms, conditions, fees and charges apply. Credit provided by ASF Custodians Pty Ltd (ACN 106 822 780 / Australian Credit Licence No. 386781).

This is sponsored content for Heartland Seniors Finance.