Let me tell you about Margaret. She is 71, owns her home outright, receives the Age Pension and has a modest superannuation balance. By most measures, she is doing fine. But she has been putting off the bathroom renovation that would make it safer to age at home, and she sees her grandchildren interstate only once a year because she can’t quite justify the airfare.
What Margaret doesn’t fully realise is that she is sitting on an asset that could change both of those things. Her home.
Australians aged 60 and over hold approximately $3 trillion in residential housing – yet that home equity often gets wasted. According to Deloitte only 1 per cent of the available home equity is accessed by eligible households. That’s not because equity release doesn’t work, but because most people don’t understand what it actually involves.
Let’s fix that.
An equity release loan or reverse mortgage is a loan secured against your home that you don’t repay until you sell, move into aged care, or pass away. There are no monthly repayments. The interest accumulates and is added to the loan balance over time. You stay in your home. You keep ownership. You access the equity you’ve spent decades building.
Reverse mortgages are regulated by the government. Australian law mandates a No Negative Equity Guarantee – meaning you can never owe more than your home’s value, even if house prices fall. That protection is legislated. The worst-case scenario that kept your parents’ generation away from these products simply cannot happen under current Australian law.
The loan to value ratio starts at 20 per cent at age 60, increasing roughly 1 per cent per year – so at 70 you can typically borrow around 30 per cent of your home’s value, and at 80 around 40 per cent.
In real numbers: if you are 68 with a home worth $750,000, you could typically access around $210,000. If you are 78 with a home worth $900,000, closer to $342,000.
These are indicative figures – your exact number depends on your lender, property and circumstances. That’s exactly why we’ve built a free Reverse Mortgage Calculator. See your own number, based on your own home and age, in under two minutes. Try it here.
The reality might surprise you. About 34 per cent of new reverse mortgages in the past year were taken out by people under 70, and most borrowers accessed around 15 per cent of the value of their home – a considered and prudent approach.
The average amount borrowed was $150,000. People used it for home modifications to age in place safely, helping adult children with a deposit, supplementing income to cover rising bills, replacing an ageing car, and funding the trips they had always planned for retirement.
Worth knowing about: the Home Equity Access Scheme is a reverse mortgage offered by the federal government. It offers a loan secured against your home charging interest at just 3.95 per cent, much lower than rates charged by private lenders. HEAS taken as regular income generally won’t affect your Age Pension.
The trade-off is that amounts are more limited. The average loan through the scheme is around $35,700 – and despite being excellent value, only 18,691 Australians are currently using it. If your needs are modest, this option is worth exploring first.
How long do I plan to stay in this home? Reverse mortgages work best for people staying put medium to long term.
How will it affect my estate? The loan balance grows over time, reducing equity for beneficiaries. Some products allow you to protect a portion – you can ask about this.
Will it affect my Age Pension? A lump sum may affect the assets test. A regular income stream generally does not. Get advice specific to your situation.
You spent decades paying off your home. You are entitled to benefit from it. If retirement isn’t quite as comfortable as you planned – if the compromises keep piling up – the equity in your home may be the resource you have been overlooking.
Use our free Reverse Mortgage Calculator now to see how much you could borrow. It takes under two minutes and there is no obligation.
General information only. Not personal financial advice. Always seek independent financial and legal advice before proceeding with any equity release product.