Heartland Seniors Finance - Reverse Mortgage Product Accreditation

As part of our commitment to ensuring the highest professional standards, this course has been designed to assist you in understanding Heartland Seniors Finance and the Heartland Reverse Mortgage, as well as the requirements under the NCCP act.

 At the end of this module, you will be asked to complete a short assessment to measure your understanding of the course material. You are required to achieve a 90% pass rate for the assessment.

Heartland Seniors Finance Reverse Mortgage Product Module

Heartland Seniors Finance Overview

  • Previously Australian Seniors Finance
  • Established in 2004
  • Only specialist Reverse Mortgage provider in Australia
  • Over 6,000 customers and $415m in financial receivables (30 June 2016)
  • Only non bank reverse mortgage lender that survived the GFC
  • Owned by New Zealand registered bank - Heartland Bank Limited
    • Listed on NZX (market cap of NZ$740m as at 10 October 2016)NZ$3.1b of finance receivables as at 30 June 2016
    • History stretches back to 1875
    • Specialises in niche products in NZ including reverse mortgages, which are a core part of business and makes up 26% of receivables


Product and Market

Product Support & Strength

While we believe the thinking and planning behind the creation of our Reverse Mortgage is revolutionary and is in many ways complex, the benefits to our customers are remarkably straight forward. Our testing process is rigorous and, coupled with a comprehensive internal reserving structure, forms an integral part of the process that provides the underlying strength to this product.

Growing Market

The Australian Bureau of Statistics projects that the over 65 population will increase by 2.5m in the next 20 years (from 3.2m to 5.7m in 2031). It also confirms that the over 65 households have a home ownership rate of 84.6% .

 This projects a current possible market of 2.7m individuals, increasing to 4.8m in the next 20 years. As there are only 42,000 reverse mortgages on issue in Australia at present , there is significant potential growth.

Other Australian providers

There are a few other providers with similar products to Heartland. However, one significant difference between our product and others is that we are the only group who specialises in home equity release, and sole company to accept applicants from the age of 60. We are also one of only a few that allows secondary properties (Holiday Homes and Investment Properties) as security and offers a product for Aged Care.

 

The Heartland Reverse Mortgage

Product 

The Heartland Seniors Finance Reverse Mortgage allows Seniors 60 years and over to access equity in their home.

The product has been designed with flexibility in mind, allowing a number of ways in order to access the funds, as well as variations for those with secondary properties, as well as customers who may require the funds in order to assist the transition into aged care.

Reverse Mortgage

Unlike a ‘conventional’ mortgage which requires the client to make regular repayments, the Heartland Reverse Mortgage allows our clients the freedom to access equity in their homes without the need to make repayments.

 The loan is available to those who meet ourage, ownership and property criteria

Aged Care Option

Similar to the standard Reverse Mortgage, but carries a key distinction by waiving the requirement for the borrower to reside in their home. The waiver is for up to five years from the date of funding.

This loan allows our clients to access equity in their residential property while they are living in residential aged care. The loan is available to those who meet our age, ownership and property criteria.

The Aged Care Option is for a loan for a maximum term of 5 years. If any customer resides in the property and intends to remain there,this Aged Care Option is not suitable

Secondary Properties

The Heartland Reverse Mortgage and Aged Care Options also allow our clients to access equity in their non-owner occupied homes(holiday home or investment property) for any personal purpose.

This option carries a 10% discount to the scale LVR relating to age. For example if a 75 year old applied the applicable maximum LVR would be 27% (30 x .90 = 27).The loan is available to those who meet our age, ownership and property criteria.

Loan Purpose

Purpose of Loan

The loan can be for any purpose. For example, a loan could be used for:

 • debt consolidation

• house renovation

• purchase of a new car

• medical treatment

• in-home care

• helping children and/or grandchildren

• a holiday

• create a regular income stream to supplement pension or superannuation income

• other leisure and lifestyle activities.

As a secondary property may also be used as security, the Heartland Reverse Mortgage could also be used to pay:

• a refundable accommodation deposit

• a daily accommodation payment

• create an income stream

• consolidate debt

• repairs and maintenance

Typically to fund a move into permanent long-term care, however other purposes are accepted. For example, a loan could be used to pay:

• a refundable accommodation deposit

• a daily accommodation payment

• home maintenance

• additional care and service costs



Product Specifications

Customer Criteria

Up to two people, both aged 60 or over, can apply for the Reverse Mortgage where at least one of them owns, or is going to purchase, a security property.

 Special consideration may be allowed for Family Trusts. Please refer to the Heartland Broker Support Team for further guidance regarding property ownership or other loan application queries.

Minimum Property Value

The minimum property value Heartland will consider is $200,000. The location and condition of the property is important and will influence the minimum property value accepted.

Minimum Loan

 Minimum Lump Sum: $10,000

 Minimum Regular Payment: $2,500 per annum (Annual, Quarterly)

                                                         $500 per month

 Minimum Cash Reserve Drawdown: $2,500

Minimum Further Advance: $5,000

Maximum Loan

 The maximum amount a client can borrow is based on the value of the property and the LVR appropriate to the age of the youngest applicant. There is no maximum loan amount.

Payment Options

 The loan can be disbursed by the following options:

• Lump sum payment

• Regular advances either monthly, quarterly or annually over 5 or 10 years

• Cash reserve component which enables the client(s) to “reserve” an amount up to the difference between the funds initially taken and the maximum loan entitlement. \Once the loan has been approved they can apply for approval to draw on this reserve at any time throughout the life of the loan.

All of the above can be used in combination.



Loan to Value Ratio (LVR)

As our clients get older, the amount they are able to borrow increases. Beginning at 15% at 60 years of age, this increases by 1% every year thereafter until the age of 90 where the rate is 45%.

 The table below provides a guide as to the percentage of home values (Loan to Value Ratio) that are available under our Reverse Mortgage Loans.

The maximum loan amount is the LVR multiplied by the property valuation.

Joint Borrowers

In the case of joint borrowers, the age of the younger borrower is used to establish the maximum LVR.

For instance, if there were two clients, one 78 years old and the other 82, with a property value of $580,000, the maximum loan amount would be 33% x $580,000 = $191,400.

Residents other than Nominated Borrowers

• If rented, the tenancy agreement must be reviewed and approved by Heartland and cannot be longer than 12 months in term

• If there are other occupiers in the property (e.g family members), an other occupier declaration must be signed, this is issued with the loan agreement


Security

Security

The Heartland Reverse Mortgage is a first registered mortgage against the security of a Nominated Borrower’s residential property. This includes a secondary property such as an investment property or holiday home, and for these loans the LVR is scaled down by 10%. It may be a former owner occupied home or secondary property in the case of the Aged Care Option, with a maximum term of 5 years.

Property criteria             

The property must be of conventional construction and in good condition. It must also be mortgage free (unless the loan is used to repay any outstanding mortgage).

We will consider rural residential properties on land up to 10 hectares in size.

Property classification and location

 While certain unconventional, large or rural residences may not be eligible, our overall aim is to provide our customers with the resources to use their assets to enhance lifestyles.

We do have some location restrictions in rural and regional locations. Please contact Heartland if you have any queries regarding a particular property. Each application is reviewed on a case by case basis.

Heartland does not lend against Retirement Villages or any property with Deferred Management Fees. Properties with unencumbered Strata Titles, such as a SEPP 5 development (over 55 only) will be considered on a case by case basis.



Portability & Further Advance

Portability

The loan may be transferred to a new property subject to Heartland’s current terms and conditions (some fees are payable). Settlement must be on the same day, or Heartland must do a separate discharge and new loan.

Further Advances

Further advances are allowed, subject to prevailing terms and lending criteria at the time. Further advances will require a full reassessment, including application, valuation and further independent legal advice.

Equity Protection Option (EPO)

The applicant(s) can choose to protect 10%, 20% or 50% of the net sale proceeds from the sale of their home. This means at all times the percentage protected is theirs, irrespective of their loan balance or property value, as long as all Terms and Conditions are adhered to through the life of the loan. There is a fee payable when the loan option is activated. Choosing the Equity Protection Option will reduce the loan amount available by the percentage selected.

• 10% or 20% option can be activated anytime throughout the term or the loan (variation fees apply)

• 50% is available only at the time of original application

Interest & Fees

Interest

There is an interest component to the loan. This accrues at our published variable rate and is calculated daily and charged monthly until the loan has been repaid.

The interest rate includes the cost of the No Negative Equity Guarantee.

Heartland publishes a Comparison Rate. Heartland does not offer a fixed rate option.

Fees

The fee structure is dependent upon the requested loan structure, property valuation and the nature of the loan required. The fees and charges are detailed in the applicable Fact Sheets.

Repayment

The Heartland Reverse Mortgage Loan, including the Aged Care Option, does NOT require regular loan repayments, as is the case with a traditional mortgage. However, payments are able to be made at any time (as long as the loan is on a variable interest rate). Repayments are not available for later redraw.

 For the standard Heartland Reverse Mortgage, principal plus interest and charges must be repaid when the last Nominated Borrower passes away, sells the property, moves into permanent long-term care or moves out of their home (whether or not it was the security property).

 For the Aged Care Option, principal plus interest and charges must be repaid when the last Nominated Borrower passes away or when the 5 year term expires.

Other than at the Aged Care Option, there is 12 months to repay the loan from the date the last Nominated Borrower passes away or moves into aged care or out of their home. If the property is sold, any balance remaining after the loan has been repaid is for the borrowers or their estate as appropriate.

Early Repayment Fees

If a client chooses to repay the loan at any time, no early repayment fees apply, only the loan balance including discharge fee are payable on exit. There is a discharge fee.


Our interest rates and fees and charges should be referred to in addition to this document.



No Negative Equity Guarantee & Power of Attorney

No Negative Equity Guarantee

The No Negative Equity Guarantee applies to all Heartland Reverse Mortgages. This means that the borrower or beneficiaries will never have to repay more than the net sale proceeds of the property, provided all loan conditions have been observed. This applies even if the loan, plus accrued interest and charges, exceeds this amount.

Powers of Attorney

A Power of Attorney will only be acceptable if:

 • It is valid as an Enduring Power of Attorney;

• It is either lodged at the relevant Land Titles Office or an originally certified copy is provided prior to settlement;

• A Letter of Comfort is provided by nominated solicitor prior to settlement confirming that:

          • the Power of Attorney has not been revoked;

          • the relevant borrower is physically unable to sign the application or does not have the mental capacity              to do so; and

          • the borrowing is for the benefit of the Nominated Borrowers.

A Guardianship Order will only be acceptable if:

• Order gives the administrator/guardian powers to act on financial matters

• A originally certified copy is provided prior to settlement with a statutory declaration confirming the order has not been revoked

• A Letter of Comfort is provided by nominated solicitor prior to settlement confirming that:

          • the order has not been revoked; and

          • the borrowing is for the benefit of the Nominated Borrowers. 

If a borrower is to sign the loan documents on their own behalf, but there are doubts regarding a borrower’s mental capacity, a letter will need to be provided by a medical practitioner. The letter must confirm in their medical opinion that borrower is able to read and understand the loan documentation. 

Reverse Mortgage NCCP Requirements & Client Decision Making

NCCP

As well as the standard National Consumer Credit  Protection Act 2009 (Cth) (NCCP)  , requirements, there are also those that are Reverse Mortgage specific and added as part of the 2010 Phase 2 of the NCCP.

These requirements include;

  • An assessment of whether or not a reverse mortgage is unsuitable by making reasonable enquiries about the borrower’s potential future needs including the possible need for aged care accommodation expenses and whether the consumer intends to leave equity in their home to their estate.
  • Providing consumers/potential borrowers with a reverse mortgage information statement which provides key information to inform consumers about the features of a reverse mortgage and the risks commonly associated with them.
  • Providing consumers/potential borrowers with projections of the equity in their home under a reverse mortgage using an equity projection calculator from ASIC’s Moneysmart website.  The projections relate to the value of the dwelling that may become reverse mortgaged and the consumer’s indebtedness over time if they were to enter into a reverse mortgage.

Client Decision Making

At Heartland, we recognise and accept that our clients require extra care and attention in ensuring they receive the appropriate product for them.

We are focused on ensuring clients can make their decisions in a low-pressure, cooperative and caring environment. Our aim is that their relationship with Heartland Seniors Finance and your organisation is beneficial and valued by all parties.

Whilst we have every confidence that our Reverse Mortgage can offer clients a considerable number of benefits and advantages, we encourage them to involve others in the decision making process, as any financial decision for our target clients is usually a major one.

Therefore, applicants should be encouraged to:

  • Seek advice, as appropriate, from trusted advisers (i.e. accountant, financial planner)
  • Talk to their family
  • Discuss their loan with Centrelink as to any effects the funds may have on their pension or other Government entitlements

When the loan offer is sent out, the client(s) must obtain independent legal advice from a registered and practicing solicitor of their choice.

Case Study 1 - Marla

You have now seen all of the components of the Heartland Reverse Mortgage. Let’s consider the key parts by examining a case study.

MARLA

Marla is a widow aged 75. She owns two properties, an unencumbered owner occupied home and a beach house, and wishes to create an income stream to supplement her pension and small superannuation incomes.

Her main residence is worth $700,000. The second property is worth $350,000. She wants a regular payment loan of $25,000 per annum for 10 years

• Does she meet the criteria?

Based on the information supplied, the loan can be reviewed as follows:

Against the family home

• LVR = 30%

• Therefore, the maximum loan amount = $700,000 x 30% = $210,000.

• If Marla is seeking to borrow $25,000 per annum over 10 years, the amount of $250,000 falls outside the borrowing parameters.

• The maximum annual payment available would be $21,000 for 10 years

Regarding Marla’s beach house, the following key features have been met:

• the property value is over $200,000

• the client is over 60 years old

• the client owns the property (i.e. mortgage free)

Heartland would be able to separately lend against her beach house

• LVR = 27% (30 x .90 = 27)

• Therefore, the maximum loan amount = $350,000 x 27% = $94,500.

• Marla may borrow $4,000 per annum over 10 years to make up the shortfall on loan against the family home

• The maximum annual payment available would be $9,450 for 10 years

Marla will be required to draw $10,000 upfront as a lump sum. Regular payments are payable on the anniversary of the loan. The first regular payment may be incorporated into the $10,000 initial drawdown if requested by the client.


Case Study 2 - Mia

MIA

Mia is aged 69. She wishes to use her unencumbered home as security.

Her property is worth $560,000. She wants a regular payment amount of $15,000 per annum for 3 years.

• What is the loan amount?

• What conditions are not met and what needs to happen to meet the Heartland Reverse Mortgage requirements?

Based on the information supplied, the loan can be reviewed as follows:

In this case, the following key features have been met:

• the property value is over $200,000

• the client is over 60 years old

• the client owns the property (i.e. mortgage free)

Key feature not met:

• regular payment requirement has not been met (these need to be over 5 or 10 years)

What is the amount Mia can borrow against the property?

• LVR = 24%

• Maximum loan amount = $560,000 x 24% = $134,400

Although Mia would meet the majority of loan requirements, she would not meet the term required for the regular payment option she is considering. Heartland only offers the regular payment option over a 5 or 10 year period. These payments can be made quarterly or annually, therefore Mia would need to adjust the 3 yearly payments to at least 5 years.

If she chose to take out regular payments for 5 years, this would be within the maximum loan amount available ($15,000 x 5 = $75,000).

Another possible option would be to take a lump sum with the balance available placed in a cash reserve, to draw from as desired.


Case Study 3 - Arthur & Dorothy

ARTHUR AND DOROTHY

Arthur and Dorothy are aged 78 and 72 respectively. They live in and own their retirement unit, worth $450,000. They want to borrow a $20,000 lump sum and receive a regular payment of $10,000 per annum for 5 years.

• What is the loan amount?

• What conditions are, or are not met, and what needs to happen to meet the Heartland Reverse Mortgage requirements?

Based on the information supplied, the loan can be assessed as shown below.

In this case the following key features have been met:

• the property value is over $200,000

• both clients are over 60

• the client owns the property (i.e. mortgage free)

• regular payment option conditions are met (5 or 10 year terms)

What is the amount that can be borrowed against the property?

1. LVR = 27% (based on the youngest borrower)

2. Maximum loan amount: $450,000 x 27% = $121,500.

In this case, Arthur and Dorothy could receive a $20,000 lump sum and annual regular payments of $10,000 for 5 years. The total borrowings would be $70,000 and thus would fall within the borrowing parameters.

Arthur and Dorothy would meet the loan requirements and the instalment options they require.

However, as the property is a retirement unit, Heartland may not be able to lend against it. It would depend on the ownership structure and the Certificate of Title, including any restrictions or encumbrances.

Heartland does not generally lend on retirement village villas. However, if the property has an unrestricted and unencumbered Strata Title, such as a SEPP 5 development in NSW, applications may be considered on a case by case basis.


Case Study 4 - Ian McNally

IAN MCNALLY

Mr Ian McNally, a widower, owns a home in Neutral Bay NSW worth approximately $1.7m and is aged 88.

• he has recently been assessed as needing residential aged care

• he and his family have decided on an aged care facility near his home

• after seeking proper financial advice Ian and his family are looking to retain his house rather than sell it to raise funds

• he requires $500,000 to fund the refundable accommodation deposit (RAD)

He enquired whether Heartland could help with the above RAD

• If so, what is the loan amount?

• What conditions are or are not met and what needs to happen to meet the Heartland Reverse Mortgage - Aged Care Option requirements?

Based on the information supplied, the loan can be assessed as shown below.

In this case the following key features have been met:

• the property value is over $200,000

• the client is over 60 years old

• the client is entering residential aged care and is looking to borrow against his former home

What is the amount that can be borrowed against the property?

1. LVR = 43%

2. Maximum loan amount: $1,700,000 x 43% = $731,000

This amount is sufficient to assist Ian meet his RAD obligation and Heartland would be able to assist with this loan


Privacy & Complaints

Privacy

At Heartland, we realise the importance of preserving the privacy and security of personal, private and financial information that our clients give to us or allow us to obtain.

It is critical and an expectation that as a partner of Heartland, you adhere to our client Privacy Policy.

Our Privacy Policy can be found here.

Complaints

Heartland’s Board and Management team are committed to building solid and valued relationships with our clients. As part of our strategy to ensure our clients are satisfied, we have implemented a comprehensive complaints management system.

In brief, this means:

•Customers can call our Customer Service Team on 03 9661 0999 or 1300 889 338 between 9:00am and 5:00pm, Mon-Fri

•Alternatively, they can write to Heartland at Level 9, 63 Exhibition Street, Melbourne, VIC, 3000

•Heartland aims to resolve issues within 5 working days (subject to complexity)

•Heartland customers can also access the Financial Ombudsman Service to assist them.

Complaint resolution information, as detailed to our customers, can be viewed on the Credit Guide. This can be viewed on our Application Form or here.

Summary & Review

Detailed below are some of the key points that should be understood about Heartland and our Reverse Mortgage.

• All Loans are for the 60 plus age group only

• The property cannot be solely owned by a third party, at least one Nominated Borrower has to be an owner

• The minimum property value is $200,000 and location is important

• The minimum loan available is $10,000. There is no maximum loan amount

• There is no set term for the Reverse Mortgage, with repayment to be made on a trigger event such as sale of the property or the passing of the last Nominated Borrower

• The Aged Care Option is restricted to the 5 year need to reside waiver term

• The amount available is determined by a Loan to Value Ratio (LVR)

• LVRs for Investment and Holiday Homes are scaled down by 10%

• No approved Nominated Borrower, if all conditions are met throughout the life of the loan, will have to repay more than the net sale proceeds of the property

• Our target clients require extra care and attention to ensure they receive the best advice

If you are unsure of any of these areas you should review them before completing the accreditation test.

Heartland Seniors Finance Accreditation Test

Q1 Bill & Sue

  • Lump sum with the knowledge they can reapply anytime when they need access to more funds.
  • A Cash Reserve Facility from which they can draw as their needs arise.
  • A combination of Lump Sum and Cash Reserve.
  • A combination of Lump Sum and Regular Payment.

Bill and Sue are a married couple aged 78 and 75. They are in receipt of the Age Pension, their
only income. They own a home in suburban Sydney valued at $820,000 and they are considering
an equity release loan.

 

They state they need some immediate funds to carry out renovations to their home and update their car and would like to discuss options for accessing regular cash to top up their aged pension payments.


Which options available to them via the Heartland Reverse Mortgage appears most suitable to their stated needs? (Response tick one)

Q2 Bill & Sue cont.

  • $182,000
  • $156,000
  • $246,000
  • $162,500

Bill and Sue are a married couple aged 78 and 75. They are in receipt of the Age Pension, their
only income. They own a home in suburban Sydney valued at $820,000 and they are considering
an equity release loan.

Based on your discussions, Bill and Sue consider a combination loan, with a $55,000 lump sum and then $8,000
per quarter for 5 years best suits their needs and objectives.


What is the maximum available loan to them? (Response tick one)

Q3 Bill & Sue cont.

  • $55, 000
  • $315,000
  • $215,000
  • $63,000

Bill and Sue are a married couple aged 78 and 75. They are in receipt of the Age Pension, their
only income. They own a home in suburban Sydney valued at $820,000 and they are considering
an equity release loan.

What is the total combination loan they are applying for? (Response tick one)

Q4 Bill & Sue cont.

  • True
  • False

Bill and Sue are a married couple aged 78 and 75. They are in receipt of the Age Pension, their
only income. They own a home in suburban Sydney valued at $820,000 and they are considering
an equity release loan.

True or False. The Centrelink treatment of Bill and Sue’s Reverse Mortgage may depend on what they do with the money received. They should contact Centrelink to discuss any impact taking a Reverse Mortgage may have on their pension or other Government entitlements. (Response tick one)

Q5 Bill & Sue cont.

  • If they take the money as a lump sum and spend it on an asset that is assessable by Centrelink (such as a car) the value of that asset would count towards the pension assets test. They should contact Centrelink to discuss any impact taking a Reverse Mortgage may have on their pension or other Government entitlements.
  • If the money is spent on a non-assessable asset (such as home improvements or a holiday), then the amount would not be assessed under the income or assets test. They should contact Centrelink to discuss any impact taking a Reverse Mortgage may have on their pension or other Government entitlements.
  • If the money is taken as a regular income stream to spend on living expenses or non-assessable assets, then it would also not affect the pension. They should contact Centrelink to discuss any impact taking a Reverse Mortgage may have on their pension or other Government entitlements.
  • All of the above.

Bill and Sue are a married couple aged 78 and 75. They are in receipt of the Age Pension, their
only income. They own a home in suburban Sydney valued at $820,000 and they are considering
an equity release loan.

Which of the following is/are fact: (Response tick one)

Q6 Bill & Sue cont.

  • Like most Australians, Bill and Sue regard residential property values as a ‘magic pudding’. These projections will confirm that belief for them.
  • Providing them with a projection will guarantee them a minimum amount of equity remains in the home regardless of how long they live.
  • Discussions with the clients about the projections may form part of your consideration of whether they fully understand the loan, and whether it is likely to meet their requirements and objectives over time.
  • The projections will help them decide what colour car they buy.

Bill and Sue are a married couple aged 78 and 75. They are in receipt of the Age Pension, their
only income. They own a home in suburban Sydney valued at $820,000 and they are considering
an equity release loan.

Before discussing whether a reverse mortgage is suitable for Bill and Sue, you must give them equity
projections that relate to the value of the dwelling and to their indebtedness, over time, should they enter
into a contract for a reverse mortgage.

What is the purpose of these projections? (Response tick one)

Q7 Gerard & Lorraine

  • Gerard and Lorraine qualify for a loan secured by the main residence.
  • They do not qualify, both applicants must be aged over 65.
  • Lorraine qualifies as exceptions can be made for age.
  • Gerard and Lorraine qualify for a loan against the holiday home, with Gerard being the sole owner.

Gerard and Lorraine are 78 and 60, respectively. They have two homes – their main residence,
worth $800,000, and their holiday home, worth $500,000. Gerard is the sole owner of the
holiday home. They want to borrow $50,000 to carry out essential repairs and maintenance to
the holiday home.

Looking at their age, do Gerard and Lorraine qualify for a Heartland Reverse Mortgage? (Response tick all correct responses)

Q8 Zac

  • $270,000
  • $500,000
  • $170,000
  • $300,000

Zac Smith is 70, a widower, and owns a town house in Mosman NSW he estimates is worth
$1,200,000. He wishes the loan is to be set up with an upfront payment of $70,000 to update
his ageing Mercedes Benz and establish an income stream of $20,000 annually for 10 years to
supplement his aged pension.

What is the maximum available loan Heartland could offer Mr Smith? (Response tick one)

Q9 Zac cont.

  • Sarah can join in the loan as a Nominated Borrower which will enable her to remain in the home as long as she wishes even if Mr Smith were to pass away or move to aged care.
  • Sarah will be required to execute an ‘other occupier’ form as part of the loan documentation process. This confirms that other occupiers are not extended the rights and benefits of a Nominated Borrower and would have to make alternate living arrangements within 12 months of a trigger event requiring the loan to be repaid.
  • Sarah’s living arrangements are just while she finishes her university studies over the next year or so and therefore are not relevant to the application.
  • Zac can leave Sarah the house in his will and therefore she can take over the reverse mortgage debt when the time comes.

As part of the due diligence Mr Smith discloses that his townhouse is his only significant asset.
Having lost his wife some eight years ago, he allows his niece, Sarah, to live there rent free in
exchange for her doing some of the cooking and housework. Sarah is 27yo and is completing
post graduate studies.

If this information is relevant which of the following are true. (Response tick one)

Q10 Mabel

  • Aged Care Option.
  • Lifetime Loan Lump Sum.
  • Lifetime Loan Cash Reserve.
  • Lifetime Loan combination Lump Sum and Regular Payment.

Mabel Staple is 89 years old and in very good health considering. She is finding her large house
and garden a bit much these days but remains keen to stay in her beloved home as long as she
can. Mabel, and her daughter, believe that for Mabel to safely stay at home she will need to carry
out some significant renovations to the main bathroom and have someone come in to look after
the garden, help her with her shopping and housework each week. Mabel is not able to meet the
additional weekly cost from her age pension and she and her daughter believe an equity release
loan is ideal.

What Heartland Reverse Mortgage option(s) may suit Mabel? (Response tick one)

Q11 Bertha

  • They are aware that the value of the former home will be treated concessionally for calculation of the means tested care fees.
  • They would like to consider renting the house as they have become aware that any rental income may be exempt for the aged pension income test.
  • They would simply like more time to consider all options and not be rushed into a fire sale of the home.
  • All of the above.

Mable’s neighbour and friend Bertha is not so lucky. She is 87 but in now in poor health. She has
recently been assessed as requiring residential aged care and the family agree it is timely to move
her to a facility where she can be appropriately cared for. They were all a bit shocked to learn
that Bertha would need to pay a Refundable Accommodation Deposit of $450,000 along with a
raft of daily care and means tested care fees to secure a place in their preferred aged care facility.
They have since learnt from the www.myagedcare.gov.au website that equity release could be an
option for Bertha to fund the RAD rather than sell the home.

Why might they consider funding the bond via a loan rather than sell the house? (Response tick one)

Q12 Bertha cont.

  • Yes.
  • No.

Berthas daughter has an enduring power of attorney enabling her to act on Berthas behalf.

Can she use the POA to apply for finance to assist fund Bertha’s care costs if Bertha is no longer able? (Response tick one)

Q13 Bertha cont.

  • here is a built in five year waiver of the requirement for borrowers to reside in the home.
  • The commission structure for introducers is lower for this option.
  • The borrower must be able to execute the mortgage documents in person.
  • Borrowers may not rent out their former home, with only extended family members permitted to reside in the property.

The Aged Care Option is similar to the standard Reverse Mortgage but has a key difference which makes it suitable for people looking to fund their entry into aged care.

Which is the key difference? (Response tick one)

Q14 Francine

  • Yes.
  • No.

Bertha’s older sister, Francine, is also in poor health. She is 89 and the decision to move to
appropriate aged care has been made.


Francine currently lives in a retirement village but still owns her large former family home in a
Melbourne suburb, valued at roughly $2m. She has enquired whether this property would be an
acceptable security for a Heartland Reverse Mortgage for the purpose of meeting Francine’s aged
care costs estimated at $550,000. The suburban property is occupied by her grandson and his
young family who pay a below market rent on the understanding that the grandson maintain the
property and pay all outgoings.

Is this property an acceptable security? (Response tick one)

Q15 Francine cont.

  • There is no set term for a Reverse Mortgage-Aged Care Option over a secondary property, with loan repayment due as for a conventional reverse mortgage loan.
  • The borrowers may be able to achieve a lower means tested fee for their aged care by borrowing against a non-owner occupied home as the loan will be offset against the value of the property and the rental income will not be included as income.
  • Heartland will apply a 10% discount to the standard LVR for this type of loan.
  • All of the above.

If the property was acceptable which of the following statements is true? (Response tick all correct responses)

Q16 Meg

  • No. Heartland Reverse Mortgages are portable but beach side properties cannot be considered until the effect of global warming on tides and rising sea levels is better understood.
  • No. The Reverse Mortgage is not portable under any circumstances.
  • Yes. Subject to the new property meeting Heartland’s criteria and portability terms and conditions being met, including simultaneous settlement.

Meg is 77 and is an existing Reverse Mortgage client having borrowed $80,000 against her home
in Brisbane three years ago. She would now like to move closer to her son and his family who live
on the Gold Coast. She has found a very suitable townhouse right on the beach at Broadbeach
which has an asking price of $680,000. Meg’s loan has increased to $97,753. Heartland valued
the existing security property at $670,000 at the time the loan was taken out but Meg thinks she
might get $730,000 if she sold in the current market.

Meg would like to transfer her loan to the new property. Is this possible? (Response tick one)

Q17 Yusef

  • Yes.
  • No.

Yusef is 85 years old and has a property valued at $750,000. He has applied for a Heartland
Reverse Mortgage to renovate his property, take a long trip back to the old country and assist
with his grandchildren’s education costs.

Yusef wishes to protect 20% of the property value for his beneficiaries.

Can Yusef do this? (Response tick one)

Q18 Yusef cont.

  • $150,000
  • $300,000
  • $250,000
  • $240,000

Yusef is 85 years old and has a property valued at $750,000. He has applied for a Heartland
Reverse Mortgage to renovate his property, take a long trip back to the old country and assist
with his grandchildren’s education costs.

If he chooses the 20% Equity Protection Option what is the maximum amount Heartland could lend Yusef?
(Response tick one)

Q19 Yusef cont.

  • 10%
  • 30%
  • 25%
  • 50%
What are the other equity protection options Yusef could have chosen? (Response tick all appropriate)

Q20 Anne & Bill

  • No. The property is within an accepted postcode but is unlikely to fit ASF’s criteria as it is rural and not a standard residential property.
  • No. Although the location is fine the property is too large.
  • Yes. Subject to there being fewer than 8 animals on the property.
  • Yes. Heartland will lend against lifestyle properties up to 10 hectares located in accepted postcodes.

Anne and Bill enquire about a Heartland Reverse Mortgage on their lifestyle property of 8
hectares in Lara just outside Geelong Vic.

Is this property likely to be acceptable to Heartland? (Response tick one)

Q21 Sally

  • There are no scheduled repayments – the loan is repaid when the borrower dies or moves out of the property.
  • As long as her loan is at the variable interest rate, she can make optional payments off of her loan (of any amount) whenever she chooses.
  • The interest rate, whilst not guaranteed, is aimed to be no higher than 1.5% above the standard bank variable home loan rates.
  • Heartland offers an Equity Protection Option.

Sally is looking to apply for a Heartland Reverse Mortgage on her home, but she is concerned
that she could not pay back the interest and that the interest rate is higher than a traditional
home loan.

Which 3 key features shown should be conveyed to Sally when discussing interest rates and repayments?
(Response tick three)

Q22 William & Raelene

  • Retirement villages are acceptable security with Heartland.
  • Each application secured on the basis of a Retirement Village unit is considered on its individual merits.
  • Retirement Village units cannot be considered by Heartland.
  • Retirement Village units are not considered conventional buildings.

William and Raelene are living in a unit in The Range Retirement Village and are seeking
a Lifetime Loan.

What advice can you give these clients? (Response tick one)

Q23 Mary & John

  • Yes, as she is listed on the mortgage documents.
  • Yes, because they are a couple and both live in the home, the loan must be taken out jointly.
  • No, because she is under 65 years old.
  • No, because both Nominated Borrowers must be aged 65 or over to be eligible.

Mary (62 years old) and John (79 years old) own their own home and meet all the requirements to
take out the Heartland Reverse Mortgage loan.

John is the only person on the title, should Mary be listed as an applicant as well? (Response tick one)

Q24 Privacy

  • True.
  • False.

Heartland accepts that our target clients are sensitive and at times vulnerable.

True or False. Under our Privacy Policy you are authorised by Heartland to use client information to monitor,
maintain and use their personal, private and financial information. Additionally, you can give the information
to another person, agency, body or company without the consent of the client. (Response tick one)

Q25 NCCP Requirements

  • An assessment of whether or not a reverse mortgage is unsuitable by making reasonable enquiries about the borrower’s potential future needs including the possible need for aged care accommodation expenses and whether the consumer intends to leave equity in their home to their estate.
  • Providing consumers/potential borrowers with a reverse mortgage information statement which provides key information to inform consumers about the features of a reverse mortgage and the risks commonly associated with them.
  • Providing consumers/potential borrowers with projections of the equity in their home under a reverse mortgage using an equity projection calculator from ASIC’s Moneysmart website. The projections relate to the value of the dwelling that may become reverse mortgaged and the consumer’s indebtedness over time if they were to enter into a reverse mortgage.
  • All of the above

As well as the standard National Consumer Credit Protection Act (NCCP) requirements there are those that are specific to Reverse Mortgages added as part of the 2010 Phase 2 of the NCCP.

Additional responsible lending obligations for this type of finance include (select all that apply)