How this lending option works
A reverse mortgage is a specialised form of home-equity lending generally designed for eligible older homeowners. Because interest and fees are usually added to the loan balance, the debt can grow over time while the homeowner's remaining equity reduces.
- Accessing home equity
- No regular repayments where the product permits
- Long-term cost and estate considerations
How a reverse mortgage works
Depending on the product and eligibility criteria, funds may be available as a lump sum, regular payment, line of credit or a combination. Regular repayments may not be required while the borrower continues to satisfy the loan conditions, but interest continues to accrue.
Assess the long-term cost
The effect of compounding interest should be modelled over different time periods and interest-rate scenarios. The assessment should also consider future accommodation, aged-care needs, property maintenance, government benefits and the equity intended to remain for the borrower or estate.
Advice and alternatives
Alternatives can include refinancing, downsizing, using savings or superannuation, family assistance or government-supported options where eligible. Independent legal and financial advice is important before proceeding with a reverse mortgage.
Common questions
How much can I borrow with a reverse mortgage?
The available amount depends on factors including age, property value, existing debt and lender policy. A lender-specific assessment is required.
Do I still own my home?
A reverse mortgage is generally secured against a home that remains in the borrower's ownership, subject to the mortgage and its conditions. Obtain legal advice on the specific contract.
Can a reverse mortgage affect the estate or government benefits?
It can reduce the equity remaining in the property and may affect financial arrangements or entitlements depending on how funds are received and used. Seek appropriate legal and financial advice.
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