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Equity-rich, cash-poor retirees have literally been given a new lease of life with the development only a few years ago of a market in this country for reverse mortgages. For many Australians, the residential family home is their main asset but sometimes additional money is needed to renovate, fund an overseas holiday or to simply live on. Short of selling the home and moving in to something less expensive, the answer can be a reverse mortgage. In a simplistic explanation, reversing your mortgage is another way of re-mortgaging your home but this time, the financial institution gives you the money and you are not obliged to make any repayments until you leave and move into care, sell your home or die. When the loan ends you, or your estate, must repay what’s owing from the proceeds of the sale of your home.

There are many reasons a reverse mortgage appeals and the market has now evolved into a $1.81 billion product sector which has grown no less than 67% in the last 12 months alone. It is predicted the reverse mortgage market will boom even further in the near future, thanks to a large group of baby boomers edging closer to retirement. CANNEX has watched the introduction and growth of reverse mortgages with interest and has now evaluated all reverse mortgages available in Australia and ranked them by star ratings in order to help the consumer choose the right product for them.

In the past reverse mortgages have been somewhat contentious because of the potential for vulnerable retirees to be given incorrect or ill-informed advice. This has been addressed by the regulators, ASIC, Australian Securities and Investment Commission and SEQUAL, Senior Australian Equity Release Association of Lenders which formed two years ago and is supported by leading providers of equity release products. However, before deciding on a reverse mortgage, all consumers should seek out independent legal and financial advice to walk through your intended beneficiaries, pension and other implications of this product.

SPENDING THE KIDS’ INHERITANCE

The popularity of reverse mortgages can suggest a new-found, free-spending attitude by the “oldies” but it is more likely to be a case of parents wanting to fund all aspects of their retirement without bothering their children. According to a recent SEQUAL/Trowbridge Deloitte study1, there are currently 31,500 reverse mortgages in Australia, 80-85% of which have been drawn down as a lump sum with the remainder being used as an income stream. Couples are the most common borrowers and although this product has been designed for people aged 60 and upwards, the average age for new borrowers is 73.

Careful consideration needs to be given to the long-term effects of a reverse mortgage. Will you have enough money after the sale of the property to fund aged care accommodation? Some products do allow you to protect a fixed percentage of the value of the property so it cannot be used to repay the debt. If leaving money to your children is important, there is now a “Protected Equity” feature available from six providers. Interestingly, 10% of existing reverse mortgage borrowers repaid their loans in full so there are obviously various uses for this product as a financial tool for the retired.

As with other, more traditional mortgages, cost remains the biggest consideration. Interest is capitalized every month so the borrower should expect compounding effects on their loan. For example, a $50,000 loan will grow to over $120,000 after 10 years so interest rate is crucial, as even a half a percent can make a big difference over the life of the reverse mortgage. There are options available to reduce loan growth. Drawing the balance progressively is one way and most lenders offer this facility. Fixed interest rate for life, offered by five lenders, is another option which ensures stability of cost throughout the year. Capping the variable rate, as one lender does, gives the borrower a guarantee that the interest rate will never exceed the initial agreed rate.

CANNEX notes lenders are currently offering variable interest rates between 8.70% and 9.32%. Fixed interest rate for life ranges from 8.59% to 8.99%. With a reverse mortgage there are other fees and charges which can apply. Some lenders do not insist on an ongoing property valuation, others value the property every two years and charge $220 for this. Upfront costs for a loan of, say, $50,000 range from $550 to $1,290, and ongoing fees range from zero to $15 a month.

The ultimate nightmare for retirees is to get to the stage where the value of their property does not cover the loan total and they are evicted, as a result. This scenario will remain just a bad dream providing borrowers stick to quality products that offer a No Negative Equity Guarantee. CANNEX, along with ASIC, SEQUAL and consumer watchdog Choice, feel this feature is mandatory, so much so that we do not include any reverse mortgage without this feature in our star ratings.

Basically, No Negative Equity Guarantee means that the loan will never exceed the value of the property. It is a form of protection for borrowers to ensure they will not have to sell the property in their lifetime and that they can never bequeath debt to their family or other beneficiaries. Of course, as with any financial product, you need to be aware of conditions that may void this agreement such as failing to pay the rates, insure the home or maintain the home to a certain standard. SEQUAL’s code of practice goes one step further and now contains minimum contract requirements to ensure that No Negative Equity Guarantee stands in all cases, except where a borrower has been fraudulent or willfully damaged the property or has tried to sell the home without the approval of the lender. These changes must be made by all SEQUAL members by January 2008 and this adds a powerful layer of protection to borrowers.

TWO LENDERS STAND OUT

CANNEX’s first-ever reverse mortgage star ratings evaluated 17 lenders who offer 55 reverse mortgage products. Our extensive research resulted in only two of these lenders being awarded five stars for superior products. CANNEX firmly believes that while an interest rate must be competitive, it cannot be the only criteria by which to judge the merits of a reverse mortgage. The features the products contain are just as important to the targeted consumer and it is these features which have seen ABN AMRO and Bluestone cross the line ahead of the others.

Both companies offer six variations of their reverse mortgages, all with Protected Equity written in. ABN AMRO’s suite covers variable rate, fixed for life, as well as four separate fixed term loans. Bluestone, on the other hand, offers variable capped interest rate loans with different pricing structures for lump sum drawdowns and instalments. The finer points of difference can be studied in the results. Our methodology, too, is explained in detail in the document at the end f the results.The product should also be obtained and considered before making any decision about whether lease refer

ABN AMRO has been awarded a rare 5 star rating by research house Cannex in its first review of Australian Reverse Mortgage providers. This independent recognition is in addition to four awards that ABN AMRO’s reverse mortgage won in 2007, making it the most awarded reverse mortgage in Australia in 2007.

ABN AMRO was one of only two “stand out” providers to receive the top 5 star rating by Cannex, which reviewed 55 reverse mortgages offered by 17 institutions. Cannex awarded stars based on the combination of interest rate, availability of options, flexibility and LVR. ABN AMRO’s product was awarded 5 stars due to its attractive product features, including the fact that it offers six variations of its reverse mortgage, all with protected equity written in.

“The focus of our reverse mortgage product on delivering benefits to customers is the secret to our success,” said Martin Lynch, Head of Reverse Mortgages at ABN AMRO.

“We’re delighted that Cannex has begun to cover this rapidly-growing area, and we believe it’s important for customers to have the comfort of an in-depth review and independent assessment when making such an important financial decision.”

Commenting on the rising trend of reverse mortgages, the Cannex report observed that: “Equity-rich, cash poor retirees have literally been given a new lease of life with the development only a few years ago of a market in this country for reverse mortgages…The market has now evolved into a $1.8 billlion product sector which has grown no less than 67% in the last 12 months alone.”

First launched in November 2005, ABN AMRO’s Reverse Mortgage has been recognised due to its rare combination of flexibility and competitive pricing. As the most flexible product in the market ABN AMRO’s Reverse Mortgage allows customers to choose how to access their cash – drawing a lump sum, monthly income or set up a line of credit – or a combination of all three.

All this choice comes with low fees and no hidden charges - no ongoing fees during the life of the loan, no redraw fees, no revaluation fees, no monthly fees.

One of the key features that led to so many awards is the Flexible Drawdown Facility. This is often referred to as the “rainy day facility”. It enables seniors aged over 60 to set up a facility that is just there if they need it – if they don’t use it, there are no monthly fees or charges and obviously no interest.

“We are obviously really pleased to receive a 5 star rating from such a comprehensive review. The real delight though in this product is seeing how relatively small sums can transform people’s lives.” Mr Lynch said the rainy day facility is also great stress relief for customers, as well as meaning they still have control of their lives.

Leading reverse mortgage broker Darren Moffatt, Managing Director - Seniors First Specialist Finance, commented: “As a leading broker group in senior’s finance, we’re in the business of finding people the best reverse mortgage solutions available.”

“Increasingly our customers are telling us they want flexibility and control, which is why the ABN AMRO reverse mortgage is proving so popular.”

He said with their unique line of credit option, and status as one of the world’s largest banks, they offer market-leading flexibility and peace of mind.

“It’s little wonder ABN AMRO is consistently in our top product recommendations to clients.”

Seven Steps to Surviving in a Volatile Interest Rate Climate

The Reserve Bank of Australia’s decision to lift the official cash rate for the first time since November 2006, we think, is a move that signals a need for Australian borrowers to rethink their mortgage habits.

The reasons behind the Reserve Bank of Australia’s (RBA) decision to increase the rate to 6.50 percent include rising inflation, a strong employment market and an economy showing further signs of growth.

This month’s widely predicted rise should be the jump start many need to seriously reconsider their current mortgage situation, which should be done every 12 - 18 months.

An increase of 0.25 percent will make a difference to repayments on the average property loan, though only modest. On a loan of $250,000 over 30 years at the average standard variable rate of 8.07 percent, a move to an 8.32 percent interest rate, or $1,890.41 per month, will mean an additional $43.79 per month.

Below are our tips for people with mortgages who are wondering how to handle the new rate rise:

1. Debt consolidation
Think about rolling all personal loans and other debts into your mortgage. This means you will be repaying them at a lower interest rate, though over a longer term. Just make sure you are sensible with your credit cards and loans after consolidating!

2. Fix some or all of your loan’s rate
Fixing the interest rate on some or all of your loan will give you surety over repayment amount for the length of the fixed term. This can be a good option for those managing a strict budget, but ensure you calculate the costs associated with doing this plus the higher interest rate you will probably pay at a fixed rate.

3. Reassess – is it time to refinance?
Your loan may offer features such as redraw that you don’t use. A loan with more flexibility, i.e. more features, is often more ‘expensive’. Consider changing to a basic product with no - or less - extras as it may have a cheaper interest rate. For example, on a loan of $250,000 over 30 years, the change from 8.32 percent ($1,890.41 per month - standard variable) to 7.85 percent ($1,808.40 - basic variable) is a saving of approximately $82.01 per month.

4. Make a lump sum payment and watch your loan shrink
Any spare money you can add to your loan, such as a tax return, bonus or inheritance, can often make a significant difference to the overall loan term and/or the repayment amount.

5. Refinance extra out of your loan to reduce it
Made extra repayments? You can refinance so your repayments reflect what you owe currently, not what you originally owed. For example, assume a standard variable loan (8.32 percent) has 20 years remaining and is scheduled to be at $230,000 ($1,969.81 per month). However, extra repayments have reduced the balance to $180,000, so refinancing the loan over the same 20-year period at $200,000 ($1,712.87 per month) will reduce your minimum repayments by approximately $256.94 per month.

6. Lengthen your loan term
Depending on your property investment and mortgage strategies, you may want to consider increasing your loan term to 30 or 40 years. Yes, you will be paying it off over an increased amount of time but your repayment amount will decrease. Say a $250,000 loan at the standard variable rate of 8.32% has a loan term of 25 years ($1,982.76 per month) that is extended to a 30-year term ($1,890.41 per month) – the repayments will decrease by $92.35 per month.

7. Most importantly, always factor in future rate rises
Any savvy borrower is already repaying a greater amount than their minimum mortgage repayment, a rate at least 0.25 percent higher than is required. This ensures a rate rise can be easily managed, and if rates don’t rise – or fall – you are ahead of the game and will see your loan term decrease.

For mow details on how to survive a volatile market contact info@SportzMortgage.com.au

The recent interest rate rise of 0.25% for many people has placed extra pressure on there ability to make their mortgage repayments. The rise of .25% can equate to an extra $50 to $100 per month. This is generally in addition to what was already placing some people is a difficult situation. If you are currently feeling the squeeze on your finances due to the recent rise or other reasons - help is available.

In fact, now would be a good time to talk to SportzMortgage who have experts on hand to assess the state of your current mortgage and recommend possible solutions. SportzMortgage can custom build a mortgage solution that will better suit your current needs and reduce the weekly repayments to a manageable amount.

Independent mortgage brokers are able to think laterally about the unique circumstances and in most cases will be able to repackage your loan in a way that reduces the immediate financial pressure. They have access to lending products from all of the major lenders in Australia, giving you choice to find the loan that suits you.

At SportzMortgage.com.au we are able to provide a range of options – allowing you to take control of your mortgage immediately. Some of the possibilities include: -

• 40 Year terms to reduce your payments but not affect your capital growth
• Low fixed interest rate from three to five years to reduce worry about more rises
• Loans with no annual or account keeping fees
• Flexible Repayments – particularly for self employed

Our lending associates have a wealth of information and expertise, with comprehensive knowledge of products which to allow them to assess and recommend the right loan for you. Why not make the call and speak to one today?

Sportzmortgage offers Australians first truly green mortgage packages with Green Options. For every mortgage settled by us we contribute an initial donation to a registered carbon offset provider, and then an ongoing payment for the life of your loan. This can be enought to offset the entire carbon emmisions for your household including average car use and flights.

Through our team of accredited Lending Associates an extensive choice of home loans from a wide range of lenders, we do the hard yards to make getting your mortgage quick, easy and free of stress. Once the mortgage is settled we purchase carbon offsets on your behalf.

The process is easy :-

We have access to all the major home loan lenders which include:

ANZ, Westpac, Bankwest, Colonial and more.

Give us a call today or fill in the ONLINE APPLICATION FORM and be on your way to a better home and a better future for the planet.

Calculators
This following calculators are provided to assist you in determining various loan options and other costs such as property stamp duty. This facility is provided as a guide only and does not necessarily qualify or approve you for a loan.

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Everyone who’s interested in achieving and enjoying a secure financial future should plan ahead. There are so many financial management and investment options available – seeking sound advice from a professional financial planning specialist is an important step towards making the most appropriate and effective decisions.

How Does The Planning Process Work?
We follow a six-stage approach to providing you with lifetime financial planning:

Initial Consultation
Achieving your financial goals begins with a confidential discussion of your particular circumstances and future needs. This helps your Financial Planner to formulate your personal financial plan.

Setting Goals
Setting clear goals is an important step towards ensuring that your investment and lifestyle objectives are met.

Covering all the Issues
A thorough financial plan covers all areas of your financial well being including investments, estate planning, superannuation and retirement planning, insurance strategies – everything related to your financial goals.

Your Personal Plan
This sets out our recommended strategies that will help you meet your goals. We’ll discuss them one by one – our aim is to ensure you’re completely satisfied before we implement the plan.

Placing Your Investments
When you’re comfortable with the plan, Quadrant Securities is licensed to place the recommended investments on your behalf.

A Lifetime Service
Regular review and reporting keeps you in touch with the performance of your portfolio. If circumstances change, we can help you make adjustments – and your Financial Planner can assist with any aspect of your financial planning needs.

The Power of Knowledge
Financial Planners undertake rigorous programs of ongoing training and professional development – we demand the highest levels of proficiency from our people. Enhancing their individual knowledge and experience, we use research from the leading independent research houses to complement our own views on property and interest bearing investments. Only those meeting our stringent criteria and appropriate to your needs are recommended.

Sportzmortgage.com.au is aligned with one of the Nation’s largest residential mortgage wholesalers. Our Relationship with a combination of high quality Lenders being Australia’s leading Banks and Financial Iinstitutions we make certain that our Commercial Lending clients have access to a product range and level of professional service - second to none.

Ahead of the pack
Sportzmortgage.com.au believes it is important to be aware of market conditions and to respond quickly to the changing demands of clients. Constant contact & communication with our clients, associates, Lenders and finance advisors determines what range of products and services are needed to satisfy our clients and their funding requirements.

The finest of the finest
To ensure that our clients receive the ultimate in products and services we continually analyse source and select new lenders that offer value in products and integrity in service. These include lenders who are mainstream, non-bank and or private lenders. The continued scrutiny and enhancement of our lending panel adds value and confidence to our process.

SportzMortgage Commercial can assist with:

To get he ball rolling complete the online application process and we will do the hard yards on your behalf.

Buying a home is a big decision and generally, it takes some time to find the right home. This gives you the opportunity to check out the lending options and products available that best suit your particular needs and circumstances. Most lenders will approve a loan ‘in principle’ (pre-approve) which allows you to look for a property with a specific budget in mind.

Choosing the right home loan is as important as choosing the right home. Home loan lenders fall into two main categories banks and non-bank lenders, such as credit unions, building societies and mortgage originators.

Right now there is healthy competition between lenders for your business. SportzMortgage has a wide range of lenders from all of these areas, so we do suggest that you take your time to thoroughly research the products, packages, options and repayment methods each offers.

To assist you in your research and ultimate selection we have a state of the art technology platform that allows you to tell us what you want and what you don’t want in your loan. Once we have entered this information a selection of the most suitable options (based on your preferences) will be short listed. A short discussion following this stage will help you decide. Some of the determining features that might be considered is the access to a branch network, internet facilities, add on features etc.

The office for Consumer Affairs Victoria will confirm that the loan with the lowest rate may not necessarily represent the best overall value when you take into account fees, charges and repayment flexibility. Hence it pays to discuss these matters in some detail with a SportzMortgage professional accredited loan specialist.