Reverse Mortgages: The Good and the Bad (What You Need to Know)

Reverse mortgages are often described in extremes — either as a great solution or a terrible idea.

In reality, they’re neither. They’re a financial tool, and like any tool, they can be very helpful in the right situation and harmful in the wrong one.

Here’s a clear, balanced look at the good and the bad — so you can decide with clarity, not fear.

The Good: Why Reverse Mortgages Can Make Sense

Access Your Home Equity Without Selling

One of the biggest advantages is being able to unlock equity while staying in your home.

This can be especially helpful if you’re asset-rich but cash-poor.

No Mandatory Repayments

Most reverse mortgages don’t require regular repayments while you live in the home.

This can significantly ease cash flow pressure during retirement.

Flexible Access to Funds

You can usually choose how you receive the money — as a lump sum, regular income, or a line of credit.

That flexibility makes it easier to match the loan to your actual needs.

No Negative Equity Guarantee

In Australia, reverse mortgages include a no negative equity guarantee.

This means you (or your estate) will never owe more than the value of your home when it’s sold.

Can Improve Quality of Life

For some people, a reverse mortgage provides peace of mind — helping cover medical costs, home modifications, or simply making retirement more comfortable.

The Bad: What You Need to Be Careful About

Interest Compounds Over Time

This is the biggest downside.

Because interest compounds, the loan balance grows rather than shrinks — and it can grow quickly over long periods.

Reduced Equity and Inheritance

As the loan balance increases, the equity left in the property decreases.

This can significantly reduce what’s left for beneficiaries, which is why family discussions are important.

Less Flexibility Later

Once equity is used, future options like downsizing or