Reverse mortgage

A reverse mortgage is a type of home loan for older homeowners that requires no monthly mortgage payments.

Reverse mortgages allow retirees access the equity they have built up  in their homes now, and defer payment of the loan until they die, sell, or move out of the home.

Because there are no required mortgage payments on a reverse mortgage, the interest is added to the loan balance each month.

A reverse mortgage is a complex product that can have a significant impact on your finances as the rising loan balance can eventually grow to exceed the value of the home, particularly in times of declining home values or if the borrower continues to live in the home for many years.

However, the borrower (or the borrower’s estate) is generally not required to repay any additional loan balance in excess of the value of the home.

While you won’t need an income in order to be approved for the loan not everyone will be eligible for this type of lending.

Some downsides to a reverse mortgage include:

  • Higher interest rates – resulting in debt rising more quickly
  • The loan affecting your pension eligibility
  • Not having enough money for the future
  • The costs can be high to break your agreement if you’ve opted for fixed interest.
  • If you are the sole owner of the property and someone lives with you, that person may not be able to stay when you die (in some circumstances)
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Michael Yardney


Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media. Visit

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