Reverse mortgages no longer for spending the kids’ inheritance
REMEMBER those poster ads for reverse mortgages years ago, a jumbo jet taking off underneath a line that read: Spend the Kids’ Inheritance!
The banks were at it bigtime to sign up as many people for a reverse mortgage, never mind whether a reverse mortgage was helpful or not.
From 1 July 2020, banks can no longer do that.
Up to that date a bank can flog a reverse mortgage to you as long as it is ‘not unsuitable’ for you.
But the Banking Royal Commission has led to the introduction of new rules. As part of those new rules, financial products must now be in your best interest.
And the bank is obliged to make sure that it is.
That means it must check what your plans are for the future. Will you want or need to sell your house at any point? What is your provision for aged care? Would Centrelink’s Pension Loans Scheme, with its much lower rate, not be a better option? What will the effect be on your fortnightly pension payments?
They must check all the things that CPSA has been banging on about for the past ten or fifteen years.