Reverse Mortgages: Frequently Asked Questions
Reverse mortgages are often talked about but not always well understood. They can be helpful in the right circumstances, but they’re not for everyone.
Below are some of the most common questions people ask when trying to understand how reverse mortgages work and when they may be useful.
What is a reverse mortgage?
A reverse mortgage is a type of home loan available to older homeowners that lets you access the equity in your home without making regular repayments.
The loan is usually repaid when the property is sold, you move out permanently, or your estate is settled.
Who can get a reverse mortgage?
Reverse mortgages are generally available to homeowners aged 60 or older (age requirements can vary by lender).
You must own your home outright or have only a small mortgage remaining.
Do I still own my home?
Yes.
You remain the legal owner of your home and stay on the property title. You’re still responsible for maintaining the property and paying rates and insurance.
Do I have to make repayments?
Usually, no regular repayments are required while you live in the home.
Interest is added to the loan balance over time, which means the amount owing increases.
How do I receive the money?
Funds can usually be accessed as:
- A lump sum
- Regular income payments
- A line of credit
- Or a combination of these
How much can I borrow?
The amount you can borrow depends mainly on your age and the value of your home.
Generally, the older you are, the higher the percentage of equity you can access.
What happens to the loan balance over time?
Because interest compounds, the loan balance grows over time rather than reducing.
This can significantly reduce the equity left in the property if the loan is held for many years.
Can I end a reverse mortgage early?
Yes, but conditions apply.
You can usually repay the loan if you sell the home or choose to refinance, but there may be fees or conditions depending on the lender and loan structure.
Will I ever owe more than my home is worth?
No.
In Australia, reverse mortgages come with a no negative equity guarantee. This means you (or your estate) will never owe more than the value of the property when it’s sold.
How does a reverse mortgage affect my estate or inheritance?
Because the loan balance increases over time, it can reduce the amount of equity left for beneficiaries.
This is an important consideration and something that should be discussed with family members and advisers.
Are reverse mortgages a good idea?
They can be — in the right circumstances.
Reverse mortgages can help improve cash flow, fund large expenses, or allow you to stay in your home longer. However, they’re not suitable for everyone and should be considered carefully.
Are there alternatives to reverse mortgages?
Yes.
Alternatives may include downsizing, refinancing, government support, or family arrangements. A reverse mortgage should usually be considered alongside other options.
What should I consider before taking one out?
Before proceeding, it’s important to understand:
- How interest compounds over time
- The long-term impact on home equity
- Fees and conditions
- How it fits with retirement and estate planning
Who should I speak to before deciding?
Because reverse mortgages have long-term implications, it’s wise to get clear, independent advice before making a decision.
Want to Talk Through Whether a Reverse Mortgage Makes Sense?
If you’re exploring a reverse mortgage for yourself or helping a family member understand their options, a conversation can help you make an informed, confident decision.
