Australian retirees have accumulated trillions of dollars in home equity — but it’s not easily accessible, especially if you want to avoid selling into a softening property market at a hefty discount.

There are several ways to unlock that money instead: to boost retirement income, help family, or pay off high-cost debt like credit cards. But it’s a serious decision that affects your finances and your family, so it’s worth understanding how these products actually work before you start.

Here are some key questions to ask yourself if you’re considering going down this path.

1. Do I meet the eligibility requirements?

Most commercial equity release products require you to be aged 60 or over, sometimes higher for certain products, and an owner-occupier. In general, lenders require minimum home values; location or property-type restrictions can also apply.

If you currently have a mortgage that you are making repayments on, you can still apply, but you may be required to use some of the proceeds to repay your existing lender.

2. Which type of equity release actually suits me?

There are several options in Australia, and they work quite differently.

The Government’s Home Equity Access Scheme (HEAS) is aimed at eligible older Australians seeking a boost to their retirement income. Through HEAS, you can receive fortnightly loan payments that accrue as debt secured against Australian real estate.

For pension recipients, the combined pension and HEAS loan payment can be up to 150 per cent of the maximum pension rate. A compounding interest rate, currently 3.95 per cent, is charged.

If you want to access more equity from your home — say, to help your kids with a deposit — then an equity release mortgage, also known as a reverse mortgage, offers more flexibility. Funds can generally be drawn down as needed, for example as a lump sum, regular payments, a line of credit, or a combination. These loans are provided by lenders, and you remain the owner of your home.

Another option, known as home sale proceeds sharing or home reversion, involves selling a share of your home’s future value for a lump sum now. You can keep living there until it’s sold, at which point the proceeds are split according to the agreed share.

Learn more about the different products by reading our free guide, Your Home, Your Wealth. Download it here.

3. How will it affect my Age Pension?

This is complex and depends on your personal circumstances.

In general, how released equity affects your pension can depend on what you do with the money. Receiving proceeds as a lump sum and retaining them as savings or another financial asset may affect your pension payments.

This is particularly relevant if you already hold other financial assets, such as money in bank savings accounts or term deposits.

It’s best to consult Services Australia for the Age Pension income and assets rules and how they apply to your circumstances.

4. Will I want to downsize in the immediate future?

Equity release mortgages generally need to be repaid when your home is sold, so they may be unsuitable if you intend to downsize soon.

A primary reason people choose equity release mortgages is because they want to stay put, at least into the medium term.

If downsizing is already on your radar, it’s worth considering whether accessing equity now makes sense once the costs and longer-term implications are considered.

5. Is my provider or broker properly licensed?

Reverse mortgages are regulated credit products. Lenders need to hold an Australian Credit Licence or be appropriately authorised, and reverse mortgages taken out since September 2012 carry negative equity protection. This means you can’t ultimately owe the lender more than the value of your home.

The market has changed considerably recently, with new lenders entering the market. You could consider using a licensed broker to help you compare loans and understand which options may suit your circumstances.

Home sale proceeds sharing products are not loans, so they work differently from reverse mortgages and don’t necessarily carry the same protections. That makes checking the provider’s track record, understanding the agreement and considering independent legal or financial advice particularly important.

Equity release can provide greater financial flexibility in retirement, but it’s a significant decision. Understanding the costs, conditions and longer-term impact before proceeding can help you decide whether it’s right for you.

MORE INFORMATION

For readers wanting to explore the broader range of ways to unlock the wealth tied up in their home — not just by selling — our free ebook, Your Home, Your Wealth, looks at the options available. To find out more and stay updated on similar articles, email the Money At 60 team

Money at 60 is a credit assistance provider, not a lender. CRN 577820. Authorised under Invictus Finance Solutions Pty Ltd, ACL 392962. Content is general in nature and not personal financial advice.

Also check out What British Retirees Did When The Property Market Froze