Gateway Bank: Is a reverse mortgage good for you??

For many people facing these increased financial pressures it can be a real challenge to make ends meet, especially older people.

Gateway Bank said a reverse mortgage could be the solution.

Head of customer operations Zeb Drummond said the biggest investment most Australians will make during their lifetime is in their home.

"More than 75 per cent of Australian retirees today own their home outright and this could be the key to riding the storm," he said.

"Retirees are often asset rich but cash poor and selling to downsize is often thought to be the only option to access the wealth tied into a property. Our reverse mortgage product provides an alternative without requiring a move out of the family home.

"It is designed to enable the borrower to access a portion of the equity in their property, while continuing to own and live in their home and repay the loan when they eventually sell, move out of the property, or pass away."

A Gateway Bank reverse mortgage requires no ongoing repayments, and the funds can be used for most purposes, including supplementing your pension to help you cover the costs of day-to-day life, renovations, buying a new car or for travel.

There are several factors to consider when looking at a reverse mortgage as an option to fund retirement. These include compounding interest, the impact it may have on the future value of your home, any inheritance planned to be passed on as well as any implications on your aged pension.

When thinking about the impact of compounding interest on your reverse mortgage, it may be worth considering a product which allows retirees to draw down only what is needed, when it is needed.

This way interest is only paid on the money drawn, instead of the entire loan amount. Another feature that can help reduce the interest on a reverse mortgage is a discounted introductory rate that can help reduce the interest in the early years of the loan.

The Gateway Bank reverse mortgage product offers both these options to assist with the interest paid.

Accessing the wealth locked in a property with a reverse mortgage could be a great way to enable retirees to enjoy their retirement in their own home.

Taking out a reverse mortgage can be a complex and emotive decision with many considerations.

It is strongly recommended that this option is discussed with family and independent advice is sought along with speaking to a specialist reverse mortgage broker or lender as to whether a reverse mortgage is a suitable option.

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