Retirees FAQs

A reverse mortgage allows you to borrow money using the equity in your home as security. Interest is charged like any other loan, but you usually don’t need to make repayments while you live in your home. The loan must be repaid in full if you sell your home or die or, in most cases, if you move into aged care. Typically, you are charged a higher interest rate on a reverse mortgage than for a standard home loan.

The money from a reverse mortgage can be used in a variety of ways, for example:

• Daily living expenses - managing your budget;
• Home repairs and home modifications;
• New furniture and household appliances;
• Medical bills and prescriptions;
• Upgrading your car;
• Paying off existing debts or credit cards;
• Continuing education;
• Overseas travel, bus tours or visiting family and friends;
• Long-term health care;
• Helping the children or grandchildren with a cash gift

The sole applicant and in case of a joint application, the youngest borrower must be 60 years of age or older. In the case of multiple applicants, all applicants must be 60 years of age or older and hold title to the property either as joint tenants or tenants in common. Eligibility also depends on the property’s value (determined by G&C Mutual Bank) and its location. You may also be eligible for a reverse mortgage even if you still owe money on your home. 

The maximum amount available to borrow is assessed on the age of the youngest borrower and the loan to value ratio. 

The value of the property is assessed and then, based on the valuation, the borrower may be eligible for the following amounts:

Regular loan repayments are not required. However you are free to make voluntary repayments of any amount (and redraw these amounts, for a fee) or repay the loan via lump sum repayments at any time at no extra cost or penalty. 

Provided you are not in default, the loan will be repaid when:

(a) the mortgaged property is sold on your death or death of the last borrower;

(b) the mortgaged property ceases to be your principal place of residence or that of the last surviving borrower; or

(c) in case of an investment property or holiday home, on the death of the last surviving borrower.

There are several risks associated with Reverse Mortgages. Chiefly among them:

• The interest rate for Reverse Mortgages is usually higher than average home loans, as the debt need not be paid on a regular basis. The debt can therefore rise quickly, as the interest compounds over the term of the loan.
• The loan may have an impact on your eligibility for pension payments from Centrelink or the Department of Veteran Affairs.
• Taking out a Reverse Mortgage for lifestyle purposes may reduce funding for future expenses such as aged care, any accommodation payments and the amount potentially left as an inheritance.

Read more about the negative equity protection on the Australian Securities and Investments Commission’s (ASIC) MoneySmart website.