How does it work?

Approved SEQUAL members provide Senior's Home Equity Release products in the form of a Reverse mortgage or a Shared Sale Agreement (also known as Home Reversion)

Reverse mortgage

A Reverse Mortgage is a no-repayment loan secured against the home. The loan is designed to continue for the remaining life of the senior homeowner. Interest charges are automatically added to the loan, which means the amount owing increases the longer the loan is in place. The final amount owing on a reverse mortgage varies with interest rates and the number of years it is needed.

SEQUAL members, who offer Reverse Mortgages, are bound by the association’s Consumer Protection Principles to clearly explain the range of possible final balances, using a purpose-made calculator.

Potential customers are encouraged to seek independent financial advice, and are required to obtain legal advice before taking out a Reverse Mortgage loan.

Reverse Mortgage customers have the protection of “no negative equity” guarantee under Federal law. This means the final balance of their loan cannot be more than the equity in their home, regardless of the term of the loan or changes in interest rates.

Reverse Mortgages are an affordable and beneficial equity release option for many senior homeowners, particularly in times of low interest rates. 

To access the ASIC Reverse Mortgage calculator, please click here.

Shared Sale Agreement

A shared sale agreement gives the Senior Homeowner a cash amount today in return for selling an agreed share of the future proceeds from the sale of their home.  It is not a loan and there is no interest rate or capitalising interest. The customer remains the legal owner of their home, and their right to remain until the Homeowner chooses to sell, is fully protected.

The cash amount is less than the agreed share sold into the future, as the product provider does not expect to receive its share of the sale proceeds for a long time into the future. However if the Homeowner sells earlier than anticipated then they have the benefit of rebates which will adjust for the actual period of the transaction and increase their own share of the proceeds of sale.

The amount available with a shared sale agreement is based on a number of factors, including the property value today and the age of the Homeowner. No matter what happens the agreed share of future proceeds cannot change, so the Homeowner will always know where they stand with respect to the minimum share of the sale proceeds they will receive.

 


More information regarding Senior's Home Equity Release can be found at the ASIC Moneysmart website. To access this site, please CLICK HERE.