Taking out a reverse mortgage can affect your ability to pay for future living expenses and reduces the value of your home. A reverse mortgage could also affect your eligibility for the Aged Pension.
Seek independent financial advice before applying for a reverse mortgage.
Equity is the current value of your home, minus any debts. It's how much of the home you own, in a dollar value.
If your home is worth $700,000 and you have $100,000 left on your home loan you have $600,000 equity. If you've paid off your home loan your equity is $700,000.
A reverse mortgage lets you borrow money using the equity in your home.
You don't have to repay a reverse mortgage debt over time like a normal home loan.
You can pay it off when you sell your home, move into an aged care facility or die.
Some lenders may let you pay off part or all of the debt in instalments.
You can borrow the money in one go (lump sum), a regular monthly payment or a line of credit (an approved amount you can spend flexibly).
Most reverse mortgage lenders let you borrow between 15% and 45% of a property's value. The percentage also depends on your age. Here's an example.
| Age of borrower | Percentage of property value available |
|---|---|
| 60 | 15% |
| 65 | 20% |
| 70 | 25% |
| 75 | 30% |
| 80 | 35.5% |
| 85+ | 45% |
You're 65 years old and you have a home valued at $900,000. You own the home outright, so your equity is 100%, or $900,000.
Your lender will let you borrow up to 20% of your equity, which is $180,000.
You decide to borrow $60,000 with an interest rate of 9% and a $500 application fee. In 10 years you sell the property, which has risen in value 3% a year to be worth over $1,200,000.
After 10 years your $60,000 loan plus interest is now a debt of $148,307. After paying the debt your equity is 88% of the home's value, which is over $1 million.*
*This is a simple reverse mortgage calculation that assumes a fixed 9% interest rate and a 3% annual increase in your property's value. It does not take other factors into account and is purely an illustrative example.
Several smaller banks and specialist retirement finance providers offer reverse mortgages in Australia today. The Big Four banks and their subsidiaries no longer offer reverse mortgages.
Please note that this list is not exhaustive.
Use our reverse mortgage calculator to estimate how much you can borrow and what it will cost you.
To use the calculator, enter the following details:
Reverse mortgages aren't risky necessarily. But they have significant costs that borrowers need to be aware of.
If you want to access the equity in your property, but don't want to take out a reverse mortgage, the primary alternative is to sell or downsize your home. However, this will incur other costs such as stamp duty, agent fees and conveyancing fees.
The Home Equity Access Scheme is a federal government scheme for older Australians. Similar to a reverse mortgage, the scheme allows eligible older Australians to get "a voluntary non-taxable loan" using a property as security.
The scheme offers a lower interest rate than reverse mortgages. To qualify you need to be of pension age, receiving an eligible pension, own a property and meet other criteria.
If you still have a home loan your lender might let you borrow a little more via a home loan top-up. This is just a way of extending your loan to borrow a little more. The interest rate will be lower than a reverse mortgage. But unlike a reverse mortgage you'll have to make regular repayments.
Another way to access equity in your home is via a line of credit loan secured by your property. You can get approved for a set amount and then you only pay interest on the money you spend.
Like a home loan top-up, you'll need to repay this loan over time, unlike a reverse mortgage.
You can access your super from age 60. Depending on what you need to cover, and how much super you have, withdrawing a lump sum from your super could be an option. After age 60 withdrawals are tax-free too.
Do you have to tell your lender if you rent out a room and turn your mortgage into an investment loan?
Read our detailed review of reverse mortgage lender Household Capital.
All Australian home loan types explained, from the common to the specific.
A guide to shared equity schemes, how they work and where to find them.
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A closer look at the home loans provided by Central West Credit Union.
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Your guide to home loan offers from First Option Bank.
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Compare home loan offers from St.George. Learn more about this lender and its loans.
If my wife and I take out the government reverse mortgage and use up the funds available would we be able to still get a reverse mortgage on the depreciated value of our property.
Hi Keith,
It is possible, but unlikely and generally not advisable, to get a commercial reverse mortgage after using up your government Home Equity Access Scheme (HEAS) funds. Commercial lenders typically require a significant amount of equity (often over 50%) and the government loan must usually be repaid first before they will consider another loan.
My mother owns her house as tenants-in-common with her partner, 50% share each. They have each provided a life interest to the other, to allow the surviving partner to continue to live in the property, in the event of the death of either partner. Would either partner be eligible to take out a reverse mortgage in their own capacity, on their own 50% share of the property?
Hello,
It’s unlikely they would be approved for their own individual loans. Usually with a reverse mortgage, all owners of the asset being offered for security must be on the loan, which means every owner of the property must be included in the application and meet the lender’s eligibility requirements. Hope this helps
We have a unit worth $950,000 with no mortgage owing. This is currently on the market. We have purchased an off the plan unit ready in 2 months. The purchase price of the new unit is $609000. We were planning to sell our current unit to purchase the new unit. We have $450000 in our superfund. Are we still able to apply for a reverse mortgage on our current property to pay for the shortfall while we wait for the unit to sell? We are 71 and 65 years of age.
Hi there,
As a financial comparison site we can’t give specific advice on financial decisions like this. There’ll be a lot to consider about your financial circumstances to know whether you can apply for a reverse mortgage. It’s probably worth speaking to a professional like a mortgage broker or accountant. They’ll know more about what considerations lenders take into account (such as if you can take out a reverse mortgage while the property is on the market) as well as other eligibility criteria or solutions.
I’m sorry I can’t be of more help.
Rebecca
Can you have Home Equity Access from Centrelink and a Line of Credit
And how does the Line of Credit be repaid
Hi Rod,
The Home Equity Access Scheme has some conditions around using your property as security for other loans. You’ll need to enquire directly with them or speak to a finance professional like a mortgage broker.
With a specific line of credit product, you’ll make monthly repayments on the amount of credit you’ve used, similar to a credit card. With a reverse mortgage, you won’t need to repay until you sell the property it’s secured against or you pass away.
Rebecca
Can you please tell me if I can reverse mortgage in Young NSW. Having trouble finding someone that will help.
Best
Ray
Hi Ray, A reverse mortgage should be possible, but a lot will depend on the specific condition of your property. A reverse mortgage is a major financial decision so it’s always sensible to get independent financial advice first.