Updated October 2026 ยท General information for Australian homeowners, mainly aged 60+.
The name makes it sound like you're un-buying your house and getting paid for the privilege. Not quite, but it's closer than you'd think. A reverse mortgage lets older Australians tap into the equity in their home without selling it or making regular repayments. It can be useful, it can be costly, and it deserves a long, slow read before you sign. Let's take it slowly.
What a reverse mortgage is
According to ASIC's MoneySmart, a reverse mortgage lets you borrow money using the equity in your home as security. You keep living in your home and, generally, don't have to make repayments while you live there. Instead, interest is added to the loan (it "compounds"), so the debt grows over time. The loan is generally repaid when you sell the home, move into aged care long-term, or pass away, usually from the sale proceeds.
You can typically receive the money as a lump sum, regular payments, a line of credit, or a combination.
How much can you borrow?
MoneySmart notes the most you can borrow is likely around 15% to 25% of your home's value, depending on your age and the lender's policy. The older you are, the more you can usually borrow, because the loan is expected to run for a shorter time. Lenders generally require the borrower to be 60 or older.
The no negative equity guarantee
Since 18 September 2012, Australian reverse mortgages have been subject to a statutory "no negative equity guarantee". In plain English: you (or your estate) can't end up owing more than your home is worth, even if property values fall. That's an important protection, but it doesn't mean the loan is cheap or that your equity won't shrink.
The big risk: compounding interest
Interest on a reverse mortgage is added to the balance, and then you pay interest on the interest. ASIC requires lenders to give you a Reverse Mortgage Information Statement that includes a worked example. In a typical example, a $450,000 home with a $50,000 reverse mortgage can see the borrower's remaining equity fall from $400,000 to under $200,000 over a long period if the home's value doesn't rise, and be much higher if the home appreciates. The takeaway: the longer the loan runs and the higher the rate, the less equity is left for you or your family. Commercial reverse mortgage rates generally sit well above standard home loan rates.
Other things to know
- Fees and costs can include establishment and ongoing fees and a valuation. Fixed-rate reverse mortgages can carry break costs if you exit early.
- Pension impact. Money from a reverse mortgage can affect Age Pension and other entitlements, depending on how you use it (for example, if it's saved rather than spent). Check with Services Australia.
- Inheritance. Your family will inherit less equity, and need to repay the loan when the home is sold or you pass away.
- Running out of equity. If you borrow too much too early, you may not be able to afford future costs like aged care, major medical bills or home maintenance.
- Getting advice. Many lenders require you to confirm that you've received independent legal advice.
The government alternative: Home Equity Access Scheme (HEAS)
The federal Home Equity Access Scheme (formerly the Pension Loans Scheme) is a voluntary, non-taxable loan from the Australian Government, administered by Services Australia and the Department of Veterans' Affairs. Key points:
- Available to people of Age Pension age who own Australian property to use as security (it can be your home, an investment property or other real estate)
- You can get fortnightly payments of up to 150% of the maximum Age Pension rate (combined with any pension you receive), and eligible participants can also access lump-sum advances
- The interest rate is set by the government and published on the Services Australia website. At the time of writing it's 3.95% a year, compounding, and is much lower than typical commercial reverse mortgage rates, though it is subject to change
- It has a no negative equity guarantee
- The debt (plus interest) is repaid from your estate or when you sell, and you can make voluntary repayments
- The amount you can access is limited, so it won't suit everyone
Alternatives to consider
- Downsizing to free up equity (and possibly using the downsizer contribution rules for super; check the ATO)
- Selling and renting, or moving to a retirement community
- Family support or a family agreement (with proper legal advice)
- The Home Equity Access Scheme or other government support
- Reviewing pension entitlements, with help from Services Australia's Financial Information Service
Checklist: before you take out a reverse mortgage
- Read the Reverse Mortgage Information Statement carefully, including the equity projections
- Use the MoneySmart reverse mortgage calculator to test different ages, amounts and interest rates
- Compare it with the Home Equity Access Scheme (Services Australia)
- Ask about all fees, interest rate type (fixed or variable) and break costs
- Check the effect on the Age Pension and other entitlements
- Talk with your family, since they will be affected, and share the paperwork
- Get independent legal advice and, ideally, independent financial advice
- Make sure you will still have enough equity for aged care or major costs later
- Confirm you can keep up with rates, insurance and maintenance on the home
- Confirm the product has the no negative equity guarantee
A gentle bit of humour
A reverse mortgage is like a very patient roommate: it doesn't ask for rent, but it keeps a tidy record, and eventually it presents the bill. Make sure you know the terms before you hand over the keys to the spare room.
Official links
- Services Australia, Home Equity Access Scheme: https://www.servicesaustralia.gov.au/home-equity-access-scheme
- Department of Veterans' Affairs, HEAS: https://www.dva.gov.au/access-benefits/pensions-and-payments/support-when-you-cannot-work/home-equity-access-scheme
- Department of Social Services, HEAS fact sheets: https://www.dss.gov.au
- MoneySmart (ASIC), reverse mortgages and calculator: https://moneysmart.gov.au
- ASIC MoneySmart helpline: 1300 300 630
Disclosure and Disclaimer
This article is general information only and is not financial, credit, legal, tax or investment advice. It does not consider your objectives, financial situation or needs. Reverse mortgages are complex and can significantly reduce the equity in your home. Interest rates, scheme rules and entitlements change often. Please do your own research and obtain independent advice from a licensed financial adviser, mortgage broker, accountant and solicitor before making any decision. To the maximum extent permitted by law, our business, its directors, employees and brokers accept no liability for any loss or damage arising from reliance on this article.