Reverse Mortgages: The Good and the Bad (What We’d Want You to Know)
Reverse mortgages are often presented as either a perfect solution or something to avoid entirely. From our perspective as brokers, the truth sits in the middle.
They can be incredibly useful in the right situation — and genuinely problematic in the wrong one. Understanding both sides clearly is the only way to decide if it’s right for you.
The Good: When a Reverse Mortgage Can Work Well
You Can Access Equity Without Selling Your Home
One of the biggest advantages is being able to unlock some of your home’s value while continuing to live in it.
For people who want to stay in their home and community, this can be a major benefit compared to selling.
Improves Cash Flow in Retirement
With no required monthly repayments, a reverse mortgage can reduce financial pressure — particularly for retirees on fixed incomes.
Flexible Access to Funds
Reverse mortgages can be structured to suit how you actually need the money.
Options may include:
- A lump sum
- Regular income payments
- A line of credit
No Negative Equity Guarantee
In Australia, reverse mortgages include a no negative equity guarantee.
This means you or your estate won’t owe more than the value of the home when it’s sold — an important protection.
Can Support Quality of Life
When used well, a reverse mortgage can fund medical care, home modifications, or day-to-day living — helping people stay comfortable and independent longer.
The Bad: The Trade-Offs You Need to Be Comfortable With
Interest Compounds Over Time
This is the biggest downside.
Because interest compounds, the loan balance grows over time. The longer the loan runs, the greater the impact on your remaining equity.
Reduced Equity for the Future
Accessing equity now means there’s likely to be less later.
This can affect future flexibility — including downsizing, aged care funding, or refinancing options.
Impact on Inheritance
Reverse mortgages almost always reduce what’s left for beneficiaries.
This isn’t inherently negative — but it needs to be understood and discussed early.
Fees and Higher Costs
Reverse mortgages often have higher interest rates and additional fees compared to standard home loans.
These costs add to the long-term impact.
Not Suitable for Short-Term Needs
If you expect to sell or move in the near future, a reverse mortgage may be poor value compared to selling outright.
The Broker’s View
From our perspective, a reverse mortgage should never be a default solution.
It should be chosen because it clearly supports your goals, lifestyle, and long-term plans — not because it was the first option presented.
Why This Conversation Matters
Most issues with reverse mortgages come from misunderstanding, poor structuring, or borrowing more than necessary.
With the right guidance, many of these risks can be managed — and the benefits can outweigh the downsides.
Want to Talk Through the Good and the Bad for Your Situation?
If you’re considering a reverse mortgage — or simply want to understand whether it makes sense compared to selling — we’re happy to talk it through in a clear, pressure-free conversation.
Book a Reverse Mortgage Strategy Conversation
The right decision comes from understanding both sides — not just hearing the sales pitch.
