For many older Australians, a reverse mortgage can provide a way to access some of the value tied up in their home while continuing to live there.

But how does a reverse mortgage actually work?

Understanding the basics is important before making any decisions. A reverse mortgage is very different from a standard home loan, and it is designed specifically for older homeowners approaching or already in retirement.

What Is a Reverse Mortgage?

A reverse mortgage is a type of loan available to older Australians that allows you to borrow money against the equity in your home.

Unlike a traditional mortgage, you generally do not make regular repayments while you continue living in the property.

Instead, interest is added to the loan balance over time, and the loan is usually repaid later when:

• you move permanently into aged care
• or the estate is settled

Most reverse mortgages in Australia are available to homeowners aged 60 and over, although some lenders may have slightly different age requirements.

How Much Can You Borrow?

The amount you may be able to borrow depends on several factors, including:

• your age
• the value of your home
• the lender’s criteria
• the type of reverse mortgage product selected

In general, older borrowers may be able to access a higher percentage of their home equity.

A reverse mortgage specialist can help you understand what may be available in your situation and explain how different loan structures may affect your future equity.

How Can the Money Be Used?

Many Australians use reverse mortgages to improve financial flexibility during retirement.

Common uses include:

• supplementing retirement income
• paying out an existing mortgage
• consolidating debt
• funding home renovations or modifications
• covering medical or care-related expenses
• helping family members
• creating greater financial breathing room

Some people choose to receive the funds as:

• a lump sum
• a line of credit
• regular payments
• or a combination of these options

Do You Still Own Your Home?

Yes.

With a reverse mortgage, you remain the owner of your home.

As long as you continue meeting the conditions of the loan — such as living in the property and maintaining it — you can usually remain in your home for as long as you choose.

For many Australians, this ability to stay in familiar surroundings is one of the main reasons they consider a reverse mortgage.

What Happens to the Loan Over Time?

Because repayments are generally not required during the life of the loan, the interest compounds over time.

This means:

• the loan balance gradually increases
• and the remaining equity in the home may reduce over time

That is why it is important to understand the long-term projections before proceeding.

A reverse mortgage calculator can help demonstrate:

• estimated future loan balances
• projected remaining equity
• and how different borrowing amounts may affect future outcomes