Lifeline for retirees

Reverse mortgages may be the lifeline that cash-strapped retirees need during this global pandemic and beyond, but they should proceed with caution. Sometimes referred to as “lifetime loans”, reverse mortgages use the equity in your property as security for a loan. In contrast to regular loans, reverse mortgage interest is added to the loan principal and the whole lot is paid off when you sell your home or die.

The amount you can borrow is a function of your age and the value of your home. The loan to value ratio (LVR) starts at 15% at age 60 before increasing in roughly 1% increments every year. So if you’re 80, you’ll be able to borrow up to 35%.

If your accumulated interest and principal