Financing retirement through your property

[duncan drennan]

This is just wrong! (that is, evil )

Up to 45% of the property value can be borrowed against with a minimum loan value of R250 000. The money can either be taken as a lump sum or in monthly draw down amounts. The loan duration is five years, during which no repayments are made, and interest of 1,98% above prime is charged from day one.

I can't see away for people to actually come out of this okay. I'm guessing the bank will take your home away if you can't pay it back, and they own it (at least 50%) if you die.

Maybe I'm missing something, but why would anyone want to do this?

[Dave A]

There's a bit more detail in this story on Personal Finance.

I guess, as always, it depends on circumstance.

"You can't take it with you" - I suppose it's a case of how much do you want to leave for the next generation.

The argument that a reverse mortgage is a strategy to reduce estate taxes is invalid - this could also be achieved by putting the property into a trust and you don't have interest chipping away at the equity.

[entoserv]

It seems there's more than just interest chipping away at our equity. There's an insurance product too!

So these guys get their hands in your pocket twice