If you’re an Aussie homeowner with a few grey hairs of experience (read: age 60+), you might have heard whispers about “reverse mortgages.” Maybe you’re picturing a bank running money up your driveway instead of taking it away, or perhaps someone told you it’s as risky as letting your grandkids loose in a lolly shop. The truth? It’s not magic—or mayhem - but it can be a game-changer (if you know how it works).
Let’s clear the confusion, bust the myths, and have a chuckle along the way.
What is a Reverse Mortgage anyway?
In plain English: a reverse mortgage lets you unlock the value in your home and turn it into tax-free cash - without selling up or moving out. Instead of paying the bank every month, the bank pays you a monthly amount (or a lump sum, or both depending on your needs). The catch? The loan (plus interest) gets paid back when you sell, move permanently, or, well, shuffle off this mortal coil.
Who’s It For?
If you’re over 60 and own all or most of your home, a reverse mortgage could be worth exploring, especially if:
- The pension isn’t quite stretching to meet the bills.
- You have a dream of a home upgrade, big holiday, or of helping your family get ahead.
- You need to fund care, big medical costs, or simply want to enjoy life’s little luxuries without cashing in the house you love.
How Does It Actually Work?
Equity Unlock: Borrow a portion of your home’s value (usually based on your age)
No Monthly Repayments: You don’t need to make regular repayments (but you can make either Interest Only or Principle and Interest repayments if you want).
Interest Compounds: Interest adds up over time, so the loan balance grows.
Repayment: The debt gets cleared when you move, sell, or pass away. By law, lenders must guarantee that when your reverse mortgage contract ends and your home is sold to repay the loan, you will not have to pay back more than the value of your home. This is known as a “no negative equity guarantee”.
Example:
Let’s say you’re 70, own your $800,000 home outright, and borrow $120,000 via a reverse mortgage. You use $30,000 for that long-awaited bathroom reno, $10,000 on a family trip, $40,000 on in-home care, and keep $40,000 tucked away as a rainy-day fund. You enjoy life, stay in your home, and repay the loan (plus interest) much later.
The Perks
- Stay in your home: No selling your beloved veggie patch required.
- Flexible use: Spend on renos, travel, bills, new hobbies, grandkids’ first car, whatever suits.
- No negative equity guarantee: You and your family won’t owe more than the value of your home, even if the market tanks.
- Tax free: The funds you receive aren’t counted as taxable income.
The Watch-Outs (A.K.A. Not All Rainbows and Lollipops)
Interest compounds: If left untouched for years, the loan grows faster than your grandkids.
Shrinkage alert: Less equity for your heirs. If you plan to leave the Taj Mahal, they may get the garden shed instead.
Centrelink: Borrowing against your home could impact eligibility for government benefits.
Top Myths—Busted
“The bank owns my house!” Nope. It’s always your home, your rules.
- “I’ll be kicked out!” Not unless you breach the contract (like failing to pay rates or trashing the place, which - let’s be honest, is unlikely).
- “My kids will inherit nothing!” Not true for most families. There’s usually equity left, but less than if you didn’t have a reverse mortgage.
Is a Reverse Mortgage Right for You?
A reverse mortgage is a tool - powerful, but best used with care. It can help you live retirement on your own terms, cover surprise costs, or spoil yourself after decades of hard work. But it’s not a free lunch: it possibly impacts your estate, your long-term options, and your government benefits, so get financial and legal advice before you leap.
Ready to Talk Strategy (Not Just ‘Selling Up’)?
At The Finance Brokers, we’re all about straight answers and smart plans. Whether you want more comfort at home, a little extra for the grandkids, or just peace of mind that your finances won’t run out before the crossword puzzles do—we’re here to help.
Curious? Let’s chat about how to use what you’ve built to support the life you want now. The only thing we can’t help with is hiding the remote from the grandkids.
Ready to discuss whether a Reverse Mortgage is for you?
Get in touch.