How It Works
A reverse mortgage, explained without the sales talk.
Read it in order, or jump to the part you're wondering about. Tap any underlined term for a short definition.
1. What a reverse mortgage is
A lets you borrow money using the in your home, without selling it and usually without making repayments while you live there. You keep owning your home. The loan is repaid later, usually when the home is sold.
You can generally take the money as a lump sum, regular payments, a line of credit, or a mix. Options differ between lenders.
2. Who can get one
Reverse mortgages are for older homeowners. Lenders set their own minimum ages, accepted property types and locations. Those details belong in our lender policy answers, where each is dated and checked.
3. How much you can borrow
The amount is mainly linked to the age of the youngest borrower and the value of the home. Generally, the older you are, the larger the share of your home's value a lender will allow. This share is called the . Exact limits vary between lenders and change over time.
4. How the interest grows
Because you usually aren't making repayments, interest is added to the loan. Then you're charged interest on that interest, too. This is , and it's the single most important thing to understand.
Want to try your own example figures, including home value growth and fees? Open the projection calculator.
5. How and when it's repaid
The loan is usually repaid in full when the home is sold, for example after the last borrower dies or moves into aged care. Many lenders also let you make voluntary repayments. If someone else lives with you, find out early whether they can stay.
6. Protections in place
Australian reverse mortgages come with a , and lenders are expected to show you projections of how the loan could grow. If something goes wrong, you can complain to for free.
Always check the exact conditions with the lender. Our protections answers go into detail.
7. Alternatives worth weighing up
- The , run by Services Australia.
- Downsizing to a smaller or cheaper home.
- , which is a sale of a share of your home, not a loan.
- Help from family, written down properly.
For independent information, see ASIC Moneysmart and Services Australia.
Glossary
- Reverse mortgage
- A loan secured against your home that you don't usually repay while you live there. The amount owed, plus interest, is generally repaid when the home is sold, for example after you move out or pass away.
- Compounding interest
- Interest charged on the interest you already owe, not just on what you borrowed. Because you usually make no repayments, the balance can grow faster over time than many people expect.
- No negative equity guarantee
- A protection that means, if the rules are met, you or your estate should not have to repay more than your home is worth when it is sold. Ask a lender exactly how their guarantee applies.
- LVR (loan-to-value ratio)
- The loan amount compared with the value of your home, shown as a percentage. For reverse mortgages the allowed LVR is usually linked to the age of the youngest borrower.
- Equity
- The part of your home's value that you own outright: the value of the home minus anything you owe on it.
- Home Equity Access Scheme
- A government scheme run by Services Australia that lets eligible older Australians receive a loan secured against property. It works differently from a private reverse mortgage.
- Home reversion
- A different product where you sell a share of your home's future value to a provider in exchange for money now. It is not a loan.
- Credit representative
- A person authorised to provide credit help under someone else's Australian Credit Licence. Their number can be checked on ASIC's professional registers.
- AFCA
- The Australian Financial Complaints Authority. A free, independent service for complaints about lenders and brokers that you couldn't resolve directly.