Reverse Mortgage customers don't know long term cost

Few borrowers with reverse mortgages are aware of all the conditions of their loan, and the consequences of not meeting those obligations, a report prepared for the Australian Securities and Investments Commission found.
 
"Many of those ASIC spoke to did not know how much the loan was likely to cost them over time, and more than half did not know what would happen if they breached a loan condition," ASIC's executive director of consumer protection, Greg Tanzer said in a media release.

"Most people did not have tailored projections about the likely long-term cost of a reverse mortgage."

ASIC's survey appears to be a month old, however. Industry lobby SEQUAL said in response that the industry had already dealt with many of the recommendations outlined in ASIC's report.

That includes a move to make the "no negative equity guarantee" a mandatory component of the code of conduct for members of the industry group.

There are currently 31,500 reverse mortgages in Australia with an average loan size of $57,350, according to the SEQUAL Trowbridge Deloitte Research Report at June 2007.