Heartland Bank reverse mortgages review

The uptake of reverse mortgages is increasing in Australia as the population ages and the price of housing continues to escalate.

Heartland Bank is Australia's number one provider of reverse mortgages so let's check how its products work.

Who is Heartland Bank Australia?

Heartland Bank Australia is a specialist digital bank which is part of Heartland Group, a financial services company operating across Australia and New Zealand. Heartland Finance traces its roots back to 1875.

Heartland Bank Australia is the nation's leading provider of reverse mortgages, as well as providing core banking products such as savings accounts and term deposits.

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Heartland Reverse Mortgage

Heartland Reverse Mortgage allows people over 60 to access some of the equity in their home, helping them fund a more comfortable retirement. Importantly, with a reverse mortgage you continue to own and live in your home.

Highlights

• Heartland deeply understands the particular needs of people over 60 and has a passion for changing the lives of Australians as they are moving to, or in, retirement.
• Flexible drawdown options such as a lump sum up front, regular ongoing advances (monthly, quarterly or annually), or a ‘cash reserve’ facility for future access to funds.

More details

How does a reverse mortgage work?

A reverse mortgage is similar to a normal home loan and allows people aged 60 and over to release some of the equity in their property.

The amount they can borrow will depend on their age, their home value, the amount of equity they have in their home, and their individual circumstances.

The major difference from a normal home loan is that borrowers aren't required to make regular mortgage repayments. Instead, the interest is added monthly to the loan amount (compounding interest) and only needs to be paid back - along with interest and fees - when:

• the borrower sells the home
• the borrower moves from the home
• the home is sold as part of the borrower's deceased estate

How do you receive funds for a Heartland Bank reverse mortgage?

Heartland gives borrowers several options including:

• a lump sum
• regular advances
• a cash reserve facility where borrowers can apply for future drawdowns as needed

Benefits of using a reverse mortgage

According to Heartland Bank, there are a number of benefits to its reverse mortgage products:

1. Stay in your home You can access the equity in your without having to sell it and find somewhere else to live
2. No regular repayments required This can relieve cash flow issues, providing money to cope with cost-of-living pressures, fund a better lifestyle, or to pay for major or unforeseen expenses
3. Still benefit from your home going up in value You retain ownership of your home and continue to benefit from rising property values over time
4. Can make optional voluntary repayments You can choose to make voluntary repayments at any time or for any amount if you wish, without penalty. Loans settled after 1 April 2017 also allow you to redraw any payments made

See also: Redraw facilities explained

Medina Cicak

Heartland Bank Australia chief commercial officer

Heartland Bank Australia commentary

“Many retirees have most of their wealth tied up in the family home. Once they stop working, income drops away and they can quickly become asset rich but cash poor.

“The age pension is rarely enough to support even a modest lifestyle, and superannuation now needs to last much longer. That puts real pressure on day‑to‑day cash flow, and many people assume the only way to free up money is to sell their home.

“For a lot of older Australians, selling is not the option they want. Heartland Bank provides an alternative that lets retirees stay in the home they love while accessing some of the equity they have built over time.

“Releasing equity can ease financial pressure, improve cash flow, and help people live the retirement they want with greater confidence.

“Reverse mortgage funds can be used for home improvements, consolidating debt, supplementing income, purchasing a car, travel, and many other needs that support a more comfortable retirement.”

What if I end up owing more than my home is worth?

In 2012, the federal government introduced a 'no negative equity guarantee' on reverse mortgage products. This means for loans taken out from 18 September 2012, you can't end up owing your lender more than your home is worth. 

Even if you do, this remaining debt will be at the expense of the lender, not the borrower. Heartland Bank upholds this 'no negative equity' protection.

See more information on Heartland Bank Australia's reverse mortgages.

What should I consider before taking out a reverse mortgage?

The federal government's Moneysmart website urges those considering a reverse mortgage to seek independent advice and consider how it may affect:

• eligibility for the age pension
• ability to afford aged care
• ability to pay future expenses
• what it will mean for your estate after you die
• the implications for others who may live with you who may not be able to remain in the home after you move out or die

The site also provides a reverse mortgage calculator.

IMPORTANT NOTICE: Heartland Bank Australia reverse mortgage applications are subject to loan approval criteria. Terms, conditions, fees and charges apply. Credit provided by ASF Custodians Pty Ltd (ACN 106 822 780 / Australian Credit Licence No. 386781)