Nine reverse mortgage myths busted

The following article has been supplied by our partners, Household Capital. Here, we look at myths surrounding reverse mortgages.

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When it comes to reverse mortgages, everyone has an opinion. Many retirees see this option as a solution that will unlock greater retirement funding and enhance lifestyle and wellbeing. Others view reverse mortgages with suspicion and hostility, regarding the category as one that exploits the elderly and robs them of their home. 

Unfortunately, while these myths about reverse mortgages persist, Australian retirees may be denying themselves the opportunity to improve their retirement funding.  

Myth 1: I can lose my home

Not only can you not lose your home, you can remain living there as long as you wish. In fact, you continue to own your home and retain the title.  

Because you don’t need to make regular repayments, unlike a traditional home loan, there is no default risk and you cannot be forcibly removed from your home by the lender.  

You just need to remain living in your home, maintain it and pay the council rates and home insurance. 

Myth 2: I could end up owing more than my home is worth

Not possible.  

The "no negative equity guarantee" (NNEG) clause in the National Consumer Credit Protection Act, introduced in 2012, means you are protected by law and cannot owe more than your home is worth, regardless of what happens to the value of your property.  

Myth 3: I'm selling part of my home

No – you remain the owner of your home and benefit from any increase in the capital value of your home. 

As well as being the most strictly regulated credit products in Australia, a reverse mortgage can transform your retirement. To learn more about the other six myths we’ve busted, simply complete the form below.

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