Reverse mortgage FAQs

Here are the answers to some of the questions asked by people considering our Reverse Mortgage. If you have a question that is not answered below or would like further information on our Reverse Mortgage please call us on 13 19 87.

How can I have a loan and not have to make any repayments in my lifetime - what's the "catch" - and will you be telling me how I can spend it?
There is no "catch". The principles of any reverse mortgage are that you are not required to make any repayments until you move out of the home on a permanent basis, e.g. into permanent aged care, or die. Interest is accrued over the length of your loan, but is added to the final repayment amount. As for how you spend it, Reverse Mortgage leaves that entirely up to you.
What are your current interest rates?
As you are aware, interest rates fluctuate from day to day and are guided by the Reserve Bank, but we are determined to keep our rates as competitive as possible. Our qualified mobile lending specialist will have a copy of our current, low interest rates at the time of your application. You should also take into account the fact we have NO ONGOING FEES OR CHARGES when comparing our interest rates to other reverse mortgage providers.
What happens if I die or move into permanent aged care? Will you want your money back straight away, like in a 'fire sale', and who is in charge of selling my house?
Under the terms of your Reverse Mortgage, you have a 12- month period within which to sell the security property and repay your loan. In the event of your death, we do not simply come in and take over the sale. The sale is left entirely in the hands of the Executor of your Will, or your family, depending on the details as set out in your Will. Once the property is sold, the loan and any interest accrued is repaid to us and the balance is divided according to the terms of your Will. Alternatively, your family could choose to keep the property and simply repay the loan. It is your choice.
Will my Reverse Mortgage affect my children's and grandchildren's inheritance?
Yes, it may, if you have decided that the proceeds from the sale of your property will be divided among your family. This is why we strongly emphasise the importance of discussing your decision to take out a Reverse Mortgage with all your family members and any other beneficiaries. Remember, you have the option to protect up to 25% of your equity as well.
What about my pension or social security benefits? Will these be affected by my Reverse Mortgage?
They may, which is why we urge you to talk directly to Centrelink, who will advise you accordingly.
What if my home is already mortgaged?
You must clear all debts against your property first. The outstanding balance of an existing mortgage can be repaid by your Reverse Mortgage loan.
Can I repay my Reverse Mortgage loan at any time?
Yes, however, Early Repayment Fees are applicable if you voluntarily repay completely within the first five years and you may incur Break Fees if you voluntarily repay a fixed rate loan early. A discharge fee will also apply.
What is Newcastle Permanent Reverse Mortgage?
It offers a selection of highly flexible reverse mortgage options for Australians aged 60 years and over who own their own home. These products allow you and your spouse/ partner (both over 60) to convert the equity in your home into available cash that you can then invest or spend on your day-to-day activities and plans.
How and when do I pay this loan back?
No, repayment or interest is due during the term of your Reverse Mortgage. The balance of your loan is repaid within 12 months of one of the following events occurring: 1) the borrower - or in the case of joint borrowers, the last surviving borrower - permanently moves out; or, 2) the death of the borrower or, in the case of joint borrowers, the death of the last surviving and inhabiting borrower. You are free to repay the loan at any time, but you need to check whether any early repayment or break fees apply.
Why don't I have to make any repayments? How does that work?
The amount you have borrowed and any interest and fees are capitalised back into your reverse mortgage. This means that instead of making monthly repayments, these interest charges and fees are simply added to your loan total. The final amount does not have to be repaid until one of the events listed above occurs.
How does a Reverse Mortgage make my life easier?
It allows you the financial freedom to do a range of things you may not be currently able to do and keep enjoying making more life memories. This could include increasing your monthly disposable income, renovating or re-painting your home, purchasing a new car, paying your grandchildren's university fees, or simply easing your day-to-day living.
Can my Reverse Mortgage loan ever exceed the value of my property?
No, Reverse Mortgage provides a No Negative Equity Guarantee. Therefore, the amount of your loan will NEVER exceed the value of your property as long as you comply with the standard loan terms.
Can I borrow more later on if I need?
Yes, you may apply for further advances at any time. Further advances are subject to the same, original lending criteria and conditions.
Do I have a choice in the type of interest rate with Reverse Mortgage?
Yes, we offer you a choice between a Variable Interest Rate and a Fixed Interest Rate. This also allows us to offer you a choice of ways in which you can have your loan released to you.
So I have the choice of a lump sum or monthly income plans?
Yes, there is a combination to suit your needs - you can receive your loan as a lump sum, as a monthly income or flexible drawdown. And Newcastle Permanent offers a choice between fixed and variable rates, depending on the structure of your loan. You also have the choice of our Fixed Rate periods of five (5), ten (10), fifteen (15), twenty(20) years, or Life.
How does the monthly income option work?
Using the How Much Can I borrow? calculator is the best first step. Put in the number of years you want to draw down money over; then decide whether you want the payments to be equal from year to year or if you'd live them to increase by 2.5% each year. The maximum will appear, then you can enter the amount required
How does the flexible drawdown option work?
You can decide how much you would like to borrow at the time the loan is set up. It is then up to you to decide when you want to draw your money, with the only condition being that it must be a minimum of $1,000 each time.
Are there any restrictions on the flexible drawdown option?
The initial limit is agreed at the time of the loan. The limit may be reduced if the independently assessed value of your property falls. This independent valuation will be carried out every three years, at no cost to you.
Do you have any fees or charges?
Naturally, interest is accrued monthly on your loan and you will need to pay the independent valuer for the initial property valuation plus your own legal fees. Apart from that we have no ongoing fees and charges. However, should you decide to voluntarily repay your loan in the first 5 years you will incur a repayment fee. Fixed rate loans may incur Break Fees, while if you change the structure of your loan there will be an administration fee of $250. All loans will incur a discharge fee of $250 on finalisation.
So there are no monthly fees or charges?
That's right. We do not have any ongoing monthly fees or charges.
Can I ever be forced to leave my home?
No, you can continue to live in your property for as long as you like, as long as you carry out essential maintenance and maintain the homeowners' insurance policy.
What if I move?
As long as you meet with our criteria at the time of your move, you may be able to transfer your loan to your new home. You will need to discuss things with us in advance of any move.
What if I choose to sell my property or move into permanent care?
You are not restricted and you can sell at any time. Once your home has been sold, your reverse mortgage will be discharged at settlement and the balance of funds from the sale given back to you.
What if my spouse dies?
You can continue to reside in your home for the remainder of your life or until you decide to permanently move, assuming the property is also in your name.
So how will my Reverse Mortgage loan be discharged?
Your loan is paid after the sale of your property, leaving the remainder of your equity at your or your estate's disposal. Beneficiaries of your estate may also choose to keep the property and refinance the balance owing.
Does this mean my family misses out on their inheritance?
No, once the property is sold and the amount owing on your loan has been paid out, you remain free to distribute any remaining sale money to whomever and however you choose. This amount will depend on how much you have borrowed and is affected by housing price growth, the duration of your plan and market interest rates. We highly recommend however, that you discuss your decision to choose one of our reverse mortgage products with family members and any other beneficiaries.
How does the protected equity option work?
You can decide that up to 25% of your equity is protected and so when it is sold that percentage is returned to you before repaying the loan. It will reduce the amount you can borrow, but there is no fee for this option and it does mean that you will definitely have some equity remaining when the loan is repaid.
Are there any restrictions as to what I can do with the money?
No, you can spend it however you want.
Are there any conditions I must adhere to during the lifetime of my Reverse Mortgage?
Yes, the borrower(s) must live in the home. It is a condition of the loan that your home is properly maintained during the term of your plan as this affects its market value. We will arrange and pay for a non-intrusive property valuation every three (3) years. The property needs to be insured by you and you must continue to pay all rates due.

Newcastle Permanent also has a Member Support Centre, where our team of understanding and knowledgeable staff will answer any further questions you may have. Just call 13 19 87.