The number of Australian homeowners choosing to avail reverse mortgages could drop further in 2011, as new federal regulations come into effect.
According to News Limited, the new regulations plan to increase information disclosure needed on reverse mortgage deals, as well as ban contracts that allow negative equity to build up on reverse mortgages.
Reverse mortgages are commonly available to the elderly aged 60 years and above, and involve money borrowing against the value of their home. No repayments are collected because interests are added to the total debt, allowing lenders to receive payment and interests when the property is sold.
The uptake of reverse mortgages in Australia has slowed in recent years, as previous regulations made the loans less profitable and major lenders have withdrawn from the market, according to News Limited. Borrowers aiming to improve their financial status can also consider switching providers or choose to compare home loans.