Be wary of reverse mortgages

For many older Australians, the family home is their largest asset. It is understandable that seniors who are feeling the squeeze from rising costs may look for ways to access some of that wealth without selling the property.

That is why reverse mortgages can be tempting. A reverse mortgage allows you to borrow against the value of your home, usually without making regular repayments.

The debt, including compound interest, is generally repaid when the home is sold, the borrower moves into aged care, or the estate is settled.

It sounds like a good deal.

However, you should be cautious before signing up for a commercial reverse mortgage. The interest rates can be high and, because interest compounds, the debt can grow much faster than you expect.

Current market information shows commercial reverse mortgage rates of 7.85% to 9.05%, as of 11 June 2026.

A recent online article promotes a product with an interest rate of 9.25%.

By comparison, the Australian Government’s Home Equity Access Scheme (HEAS), currently charges 3.95% per annum, compounded fortnightly. Though all these rates exclude fees that may apply.

The scheme allows eligible seniors to receive a voluntary, non-taxable loan secured against their real estate, with payments available as fortnightly amounts, lump sum advances, or a combination of both.

That difference in interest rates matters. A loan growing at nearly 9% a year will eat into home equity much faster than one growing at 3.95%. For seniors who want to preserve as much of their home value as possible, whether for future aged care needs, a surviving partner, or their children, the cost of borrowing should be a central consideration. Despite this, the HEAS remains relatively small and underused. Department of Social Services (DSS) data shows that, as of 31 March 2026, there were 19,426 participants, with an average loan amount of $36,875 and a total loan balance of $716.3 million.