Stuck in Reverse

Hi Scott,

My daughters swear by your advice and said I should run our problem past you. My husband and I are in our eighties and have had a reverse mortgage for 12 years, without paying anything back. We are getting worried that the longer we live, the less our three kids and their families will end up with when we are gone. I rang the bank and asked if they could lower the interest rate but the answer was “no”. Do you have any suggestions?

Launa and Reg

Hi Launa and Reg,

Reverse mortgages are the financial equivalent of a rottweiler dressed up as labrador:

Essentially the bank gives you a lump of dough, and you don’t have to pay anything back.*

(*But the bank charges fees, plus an interest rate that is generally higher than a home loan.)

Nice doggie!

The bite comes years down the track when people find that the bank owns much more of their home than they thought possible; they’ve experienced compound interest in reverse.

Because of this, reverse mortgages taken out from 18th September 2012 have had to include a ‘negative equity protection’ so you can’t end up owing the bank more than your home is worth. However, you may have missed out on this important safeguard.

The fact is that a reverse mortgage is a very complex dog, and one that was pushed on a lot of retirees without a lot of explanation. So, I’d like you to ring 1800 007 007 and speak to a not-for-profit financial counsellor who will be able to read through your contract and see if there are grounds to push back and negotiate with your lender.

Scott.