They’re the mortgages that directly target asset-rich cash-poor over-60s who might fancy a holiday or new car or need some renovations they couldn’t otherwise afford, 9News reports.
But these reverse mortgages that don’t require any monthly repayments can have a disastrous impact.
Trevor and Stewart Pitt, who recently had to sell their family home their parents bought in 1958 to pay back a reverse mortgage, knew the day would come.
His parents took out a reverse mortgage years ago to help fund their lifestyle.
They were receiving a part pension and knew their house would be able to cover the mortgage when they died.
The sons supported the move because they wanted their parents to live as comfortably as possible.
“We’re selling the family house basically because my parents took out a reverse mortgage. That’s drawn down, we’ve taken out as much as we can so we have to repay it,” Stewart said.
“It (the interest) just continually compounds – that’s the negative side.”
It compounded so much that the sons, who inherited the home, had to repay half a million dollars.
The Australian Securities and Investments Commission warns reverse mortgages are complex and can have a significant impact on finances and relationships and quality of life in retirement.
It’s undertaken an inquiry into the sector and is due to hand down its findings in coming weeks.
“ASIC is reviewing the reverse mortgage market in Australia and expects to report on its findings in August 2018,” the commission said in a statement to 9NEWS.
“ASIC has found that some retired Australians can slightly improve or maintain their quality of life by taking a reverse mortgage, but they should still be careful about the long-term risks.”
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