The Australian Securities and Investments Commission have released a report on reverse mortgages today - All we have is this house - that "captures the experiences of home-owners". The report identified a number of factors that have the potential of hindering sound and informed decision making and thus increase the risk of future problems for those who choose to access a reverse mortgage. These factors include:
- The complex nature of these products and the dissimilarity with other credit products,
- Difficulties faced budgeting for the long-term with access to a large amount of credit,
- Reluctance to consider the risk of declining health in the future and the impact of this on financial needs, and
- Children encouraging older parents to take out a reverse mortgage to be used for the benefit of these children, in inappropriate circumstances
The key points from the report seem to be that people considering the use of a reverse mortgage should be careful doing so and seek expert advice before stepping into this realm.
At A Clear Direction we would be very hesitant in recommending the use of a reverse mortgage to our clients and would only consider it under very specific circumstances.