Cheapest Reverse Mortgages
Now that the Commonwealth Bank has joined early movers such as Bluestone Equity, Australia’s reverse mortgage market is due to grow rapidly. So what’s the cheapest reverse mortgage in the market at the moment?
Measured strictly in terms of interest rates, the lowest rate on offer comes from the Transcomm Credit Union at 7.5%; the lowest rate from a bank is 7.72% from Perth’s BankWest. As with conventional or “forward” mortgages, the lower the rate the better. With reverse mortgages, the interest bill gets added to the total debt that the equity in your house will be expected to fund when the mortgage ends.
Of course, bank fees may change the final cost of any reverse mortgage. For example, application fees can be vary widely, from zero to $950.
Reverse mortgage products are increasingly popular with the over-55s; whether that’s a good or a bad thing depends on whether the mortgage is based on your house, or the house you thought you were going to inherit.
As Eureka Report contributor Peter Mair has pointed out in a previous issue, the reverse mortgage business will ultimately have huge influence, not just on “generational wealth transfer” but also retirement planning.
It is expected the number of reverse mortgage products could double in the coming year, and recently key players in the industry formed a non-profit marketing association for the industry, known as SEQUAL.
It’s very early days with reverse mortgages. If you are planning to enter this market, make sure that under no condition can the contract allows for the reverse mortgage to get to the point of negative equity ' where the debt owing on the reverse mortgage is higher than the value of your home ' otherwise your estate must pay the difference. It’s called a “no negative equity guarantee”. If your lender does not offer this guarantee, do not deal with them.
| REVERSE MORTGAGES (Current as at March 9, 2006) | |||||||||||||
| Institution | Product Name | Int Rate (%) | Min Age |
Max Loan Amount
|
App Fee | Settl't Fee | Legal Fee | Val Fees | M'thly Fee | No Neg Eq G'tee |
Lump Sum/ reg payments | ||
|
Age 60-64
|
Age 65-69
|
Age 70
|
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| ABN Amro | Home Equity Access Variable | 60 | 11–14% of property value | 15– 18.5% of property value | 20– 50% of property value | $0 | $0 | At Cost | $300 | $0 | Yes | Either or combination | |
| Australian Seniors Finance Limited |
Lifetime Loan | 8.20 | 55" | 15–19% of prop value | 20– 24% of prop value | 25–50% of prop value | $695* | $0 | $0 | $295–825 | $12 | Yes | Either or combination |
| BankWest | Seniors Equity Release | 7.72 | 65 | n/a | 25% of prop value up to $250,000 | 25% of prop value up to $250,000 | $700 | $0 | $0 | Yes | Lump Sum or draw downs upon request | ||
| Bluestone Equity Release |
EQUITYtap (variable interest capped for life#) | 8.19# | 60 | Joint borrower: 15–21% of property value, up to $1,000,000. Single borrower: 15–27% of prop value |
Joint borrower: 15–27% of property value, up to $1,000,000. Single borrower: 20–34% of prop value |
Joint borrower: 20–45% of property value, up to $1,000,000. Single borrower: 25–45% of prop value |
$0 | $600^ | $450 | $200^ | $0 | Yes | Lump Sum |
| Commonwealth Bank |
Equity Unlock Loan | 8.32 | 65 | n/a | 20% of prop value up to $275,000 | Up to 45% of property value up to $425,000 | $950 | $100 | $0 | $150 | $12 | Yes | Either or combination |
| Macquarie Mortgages |
Macquarie Silver Living (Variable) | 8.12 | 60 | 15– 19% of prop value, up to $500,000 | 20–24% of prop value up to $500,000 | 25–40% of prop value, up to $500,000 | $300 | $350 | $0 | $0 | $5 | Yes | Either or combination |
| OFM Investment Group Ltd (Formerly Over Fifties Mutual) |
Seniors Home Equity Release Loan (SHERL) | 8.25 | 60 | 15–19% of prop value, up to $1,000,000 | 20–24% of prop value up to $1,000,000 | 25–45% of prop value, up to $1,000,000 | $680 | $0 | $0 | $190** | $8 | Yes | Either or combination. Cash Reserve Avaliable |
| Police & Nurses Credit Society |
Easy Living Access Loan | 7.82a | 65 | n/a | Up to 30% of property value, up to $300,000 | $850 | $0 | $50 cost | $6.66 | Yes | Lump Sum | ||
| RESI | Seniors Equity Advantage | 8.10 | 60 | 15–19% of prop value up to $500,000 | 20–24% of prop value up to $500,000 | 25–40% of prop value up to $500,000 | $0 | $0 | $434 | $220 | $0 | Yes | Lump Sum |
| Royal Guardian Mortgage Corp |
Royal Golden Years | 8.09 | 60 | 15–19% of prop value up to $500,000 | 20–24% of prop value up to $500,000 | 25–40% of prop value up to $500,000 | $550 | $50 | $375 | $220 | $0 | No | Lump Sum |
| St George Bank | Seniors Access Plus Home Loan | 8.32 | 63b | 15% of property value, up to $150,000 |
20–25% of prop value up to $250,000 | $750 | $184.50 | $15 | Yes | Either | |||
| StateWest Credit Society |
Reverse Mortgage | 7.80 | 65 | n/a | 15% of prop value, up to $80,000 | 20% of prop value up to $100,000 | $475 | $100 | At cost | $174 | $6.66 | Yes | Lump Sum |
| Transcomm Credit Union |
Annuity Plus Options | 7.50 | 55 | 12% of property value | 18% of property value | 19% of property value | $750 | $242 | $0 | $250–350 | $8 | No | Either or combination |
| Vision Equity Living | Equity Release | 7.99 | 60 | 15–19% of prop value | 20–24% of prop value | 25–40% of prop value | $695 | 1% | $330 | $250 | $0 | Yes | Either or combination |
| " One nominated resident must be over 60.
* Additional fee of $295 applies to instalment option. Minimum property value is $150,000 # Interest rate capped at 9.89%. 8.39% for Instal and combo option ^ $0 fee for loans over $100,000 ** Assuming the property is valued less than $1 mil in a metropolitan area a Available to VIC and WA residents only. b Sydney, Melbourne, Brisbane Metro, Gold Coast and Sunshine Coast only. Minimum eligible age of 65 in all other lending areas. |
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Source: Infochoice.com.au
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