Why not talk to RHG - There are many loan options if people will just ask!
G’Day Grant
If the interest rate on your Parents’ loan is ‘
up around 10%’ then is this a low doc – or even a ‘no doc’ – loan?
The main problem with refinancing since the NCCP is that the borrower must be no worse off than previously once the refinance is complete
Reverse mortgage products may not have any required periodic payment, but they do have a higher interest rate to compensate for that, and the interest does, of course, compound.
Another new requirement is that lenders must now satisfy themselves of the ‘exit’ strategy for older borrowers particularly if they are no longer working. If this is their ‘home’, do they have another property, or other investments, or superannuation funds, sufficient to satisfy the debt without causing ‘undue financial hardship’.
Otherwise, if their exit strategy is to sell their home to pay out the debt, it may be difficult to find a lender which can see the logic in that unless they are now living in a high value property and would be downsizing to a fully paid low value property at a later date.
What has prompted your enquiry on their behalf at this time?
Are they paying Interest Only and the IO term is about to expire?
If so, are they finding it hard to meet payments now, and will find it very difficult once the Principal & Interest payments start?
Would the equity in their property, if sold, enable them to buy another property outright?
Would the equity in their property, if sold, enable them to buy another property with a much smaller mortgage and much lower payments?
Do they have any other assets of any particular value?
If you can share a few more details, including the loan product and actual interest rate and whether Interest Only or Principal & Interest payments, there may be a few more suggestions as to what options may be available
Cheers
Kristine
By the way: If Principal & Interest payments are about to commence, and if they have reduced the principal balance of the loan, they should be able to renegotiate the P&I payments to reflect the lower principal balance.
Or: They may even be able to negotiate for another 5 year Interest Only term. Download a copy of the Fees & Charges sheet
here . If an action is in the sheet (
Loan Variation Fees), then they can do or negotiate to do that action. Probably the only thing they may not be able to do is to extend the life of the loan.
BUT if they have a low doc loan, and have had it for more than 3 years, then to the best of my recollection they can apply to convert the loan to a full doc product for just a switch fee – NOT a new application, just a product switch.
It may help if they read their
Loan Documents again, and perhaps call Customer Service and ask what options are available to them at this time eg
extend the Interest Only period,
switch to another loan product, or even both (switch and extend)
Often the solution is right where you stand and doesn’t take much effort or angst at all
Hope this helps!
