A report capturing the experiences of home-owners with a reverse mortgage has been released by ASIC.
The report, All we have is this house reveals that while the borrowers interviewed were generally satisfied with the reverse mortgages they had taken out, several factors inhibited ‘good consumer decision-making’.
The report identified several factors that have the potential to hinder informed decisions and increase the risk of future problems, including:
* a lack of familiarity with reverse mortgages;
* the complex nature of these financial products and their dissimilarity to other credit products,
* difficulties budgeting for the long-term with access to a large amount of credit, and estimating how much equity might be available at any time in the future;
* a reluctance to consider the risk of declining health in the future and the impact of this on their financial needs; and
* children encouraging their older parents to take out a reverse mortgage or use the funds for the benefit of these children, in inappropriate circumstances.
ASIC’s Executive Director of Consumer Protection, Mr Greg Tanzer said very few of the borrowers interviewed were aware of all the conditions of their loan and the serious consequences of not meeting these obligations.
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