Don't reverse into a hole
Issue Date: - Friday, 28 March 2008
Consumer Protection and the Council on the Ageing WA Inc are to present a series of seminars aimed at providing information and advice for seniors concerning reverse mortgages.
Reverse mortgages are loans that allow people to use the equity in their home to obtain money, repaying the debt much later, at a cost.
"Reverse mortgages allow home owners to borrow money against the equity in their home for things like holidays, a new car, renovations and gifts," Consumer Protection Commissioner Patrick Walker said.
"What has attracted people to these types of loans is the fact that repayments are generally not required until the borrower sells the property, moves into an aged care facility or passes away.
"By June last year more than 31,000 reverse mortgage type loans had been taken out Australia wide by people aged 70-79, with average values of $57,000.
Potential borrowers need to be aware, however, that given the structure of reverse mortgages there are a number of potential risks, including:
- A large proportion, or all, of the proceeds from the sale of a home may be required to pay off the loan since interest accumulates over the life of the loan and no repayments are made. Borrowers may therefore not have enough money left over to pay for alternative accommodation, such as retirement villages or special care facilities, or for leaving money to their estate;
- Borrowers may have to sell their home and repay the loan in full if they breach certain clauses of the loan contract; and
- If spouses, partners and other family members are not a co-borrower on the loan they may need to vacate the property when the borrower passes away.
"It is therefore absolutely vital that people considering these types of loans obtain comprehensive information and independent financial and legal advice before committing their greatest asset, their home," Commissioner Walker said.
Seminars are being conducted on:
- Friday 28 March at the Scarborough Community Hall from 1:30pm to 3:30pm
- Wednesday 23 April at Whitfords Senior Citizens Centre from 1:30pm to 3:30pm
- Tuesday 13th May at the Mandurah Senior Citizens Centre from 1:30pm to 3:30pm
- Thursday 19th June at the Melville Community Centre from 9:30am to 11:30am
Attendance is free but bookings are essential by telephoning the Council on the Ageing on 9321 2133.