What you should ask |
What you should keep in mind |
| What are the age and eligibility criteria for the loan? |
With most loans, you should be able to borrow more, the older you are. For couples, the amount you can borrow depends on the youngest borrower's age. Some lenders may be choosy about the properties they take. |
| What are the costs? |
Products can have a range of costs including establishment and ongoing fees and costs for home valuations. If these fees are added to your loan, interest is charged on them, which compounds (or builds up over time). |
| What is the interest rate? |
Interests rates are generally higher than for traditional home loans and differ between products. |
| Has the property been independently valued? |
The valuation of your home will determine how much money you get so make sure it's an independent valuation. |
| Is the interest rate fixed or variable? |
A fixed rate usually costs a little more and a higher fee or ‘break fee’ may apply if you pay off the loan early. But if you are worried that interest rates will increase, you may wish to lock in a rate you consider more favorable over the long term. |
| What about rates, insurance and maintenance? |
Most products require you to pay rates, maintain and insure your home. Maintenance can be costly over time. And as you get older, you may find it difficult to maintain the property in the same way you had done previously. |
| Are you limited in how you can deal with your home? |
You are often required to live in your home and maintain it to a standard set by the lender. You may not be able to sell, lease or vacate your home without the lender's ok. You may not be able to renovate if the renovations reduce the value of the property. You may also have to check if you want someone else to come and live with you in your home. |
| What are the terms and conditions? |
If you breach the terms and conditions in the contract you may lose key rights under the contract (such as the no negative equity guarantee) and the lender may have the right to evict you. Get a lawyer to check the fine print. |
| What if you want to move home? |
Check if the loan is portable. |
| How are the funds paid? |
Funds can be paid as an upfront lump sum, regular monthly payments, a line of credit or a combination of all of these options. Check which options are available. |
| What are the pros and cons of taking the loan in different forms? |
You may be able to slow down the growth of your debt by choosing regular payments instead of a lump sum, because you pay interest only on the amount you've actually withdrawn. Check with your financial adviser which option is best for you. |
| What will be the impact on your government pension? |
Payments can impact on your pension entitlements. Talk to Centrelink Financial Information Service or the Department of Veterans' Affairs for more information. |
| What if a resident in the home is not a borrower on the contract? |
Only a few products protect the rights of resident non-borrowers. In other cases, they may have no rights when you die or leave the property. |
| Is the provider financially sound / prudentially regulated? |
If not, there may be an increased risk that the provider may not be able to meet any long term promise to make payments. |
| Can you cancel? |
Check if there is a cooling off period. |
| What rights do you have if something goes wrong? |
If the product provider and issuer are members of an external dispute resolution scheme you will have better access to possible resolution of disputes at low cost. |
