From Sydney Morning Herald 01/07/09
Reverse mortgages get a lot of attention because they are marketed by financial institutions and sold mostly by advisers on commissions. They are equity-release products where those aged over 60 take out a loan against the equity in their home. The loan is repaid when they sell the home to go into a retirement home, or repaid from the estate when they die. As no repayments are made on the loan, the interest capitalises.
The Australian Securities and Investments Commission has published a booklet on using equity in the home. According to its calculations, someone taking out a $50,000 loan at 60 could owe $232,000 in 15 years' time and more than $1 million in 30 years.
Despite all of the warnings about how quickly the debt can grow, there is no doubt reverse mortgages have a role to play. We have too much of our wealth in the family home and want to maintain our lifestyle in retirement. So it's inevitable reverse mortgages are going to be big business, particularly as commission-driven salespeople are pushing them..................................
Full Article :
http://www.smh.com.au/news/business/money/investment/a-better-pension-bet/2009/06/29/1246127475361.html
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