Reverse Mortgages Still have a place

The government is proposing some changes to the reverse mortgage market, and I’ve got to say I think they are pretty common sense ways to protect the borrower from unscrupulous lending practices.

They may lead to lenders being willing to lend slightly less on the value of the home, but the chances of getting a very nasty surprise is significantly mitigated. Basically the changes would ensure that the value of the loan could never exceed the value of the home as far as the borrower or their estate is concerned. If it does, then this is seen as a miscalculation on the lender’s part and they would bear the loss. It also gives the estate or beneficiaries the option to pay the lender the market value of the home or the loan amount, whichever is the lesser, if they want to keep the family home. Minor breaches of the contract by the borrower would also not be grounds for foreclosure. SMSF and non-SMSF clients alike often have a house that represents a substantial asset in their portfolio of assets. In some cases, accessing the value of this asset can make the difference between a comfortable retirement and one spent scrimping and saving. So I think its good that steps are being taken to ensure that the market for these types of loans protected (so that they can continue) but also making sure that predatory practices are stopped.