What is reverse mortgage?

A reverse mortgage (or 'lifetime loan') is a special home-loan product available only to owner-occupiers aged 60+ (some lenders 65+). Borrowers receive funds as a lump sum, regular drawdowns, or a line of credit — and make no required regular repayments. Interest accrues and capitalises onto the loan balance, which is repaid in full when the property is sold (death, moving to aged care, or voluntary exit).

The 'no negative equity guarantee' is a statutory consumer protection under the National Consumer Credit Protection Act: the borrower can never owe more than the property's eventual sale price, even if the compound interest balance exceeds the sale proceeds.

Trade-offs: reverse mortgage rates run 1.50-2.50% above standard variable home loan rates, and the compounding nature means a $200,000 reverse mortgage at 8% can grow to $400,000+ over 10 years. Pension Loans Scheme (now Home Equity Access Scheme) is a Government-funded alternative for age pensioners at materially lower rates.

lifetime loan · equity release · senior home loan