Reverse Mortgages and the Home Equity Access Scheme
ADS Team
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August 3, 2026
about 1 month ago
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In short: A reverse mortgage lets a homeowner aged 60 or over borrow against their home with no required repayments - interest compounds onto the balance and the loan is repaid when the home is sold or the last borrower leaves. Australian reverse mortgages carry a statutory no negative equity guarantee, so you can never owe more than the property is worth.
Key takeaways
- No repayments are required; interest compounds and the debt grows over time.
- The no negative equity guarantee is a legal protection, not a lender concession.
- The government Home Equity Access Scheme usually charges a materially lower rate.
- Compounding is the real cost - a debt can double in roughly a decade at typical rates.
How the debt grows
Borrowing $150,000 at 9% with no repayments, on a $900,000 home:
| Years | Debt | Equity remaining (no price growth) |
|---|---|---|
| 0 | $150,000 | $750,000 |
| 5 | $230,800 | $669,200 |
| 10 | $355,100 | $544,900 |
| 15 | $546,300 | $353,700 |
| 20 | $840,600 | $59,400 |
Property growth offsets some of this. But the debt compounds regardless, and it compounds faster than most people expect.
Reverse mortgage vs the government scheme
| Commercial reverse mortgage | Home Equity Access Scheme | |
|---|---|---|
| Provider | Bank or non-bank | Services Australia |
| Rate | Market rate, typically higher | Government-set, typically much lower |
| How paid | Lump sum, income stream or line of credit | Fortnightly payments, or limited advances |
| Maximum | Age-based percentage of value | Capped as a proportion of the pension |
| Best for | Larger one-off needs | Supplementing regular income |
For income supplementation, the government scheme is usually the cheaper option by a wide margin and is frequently overlooked.
What to think about first
- Aged care. Drawing equity now may reduce what is available for a future accommodation payment.
- Pension impact. Money drawn and held can count under the assets or income tests.
- Family. The debt is repaid from the estate. Conversations are better had early than discovered later.
- Alternatives. Downsizing, the downsizer super contribution, or a smaller commercial loan may serve better.
Lenders must provide projections showing the debt over time. Ask for them and read them - it is general information, not personal advice, and this is a decision to take with a licensed adviser.
Frequently asked questions
Can I lose my home?
Not through the debt exceeding the value - the no negative equity guarantee prevents that. You can be required to repay if you breach the contract, for example by not maintaining the property or not living in it.
Does it affect my pension?
It can. The loan itself is not income, but funds drawn and retained may count under the assets or income tests. Check with Services Australia before drawing.
What happens when I move into aged care?
The loan generally becomes repayable when the last borrower permanently leaves the home, which usually means selling. That interacts directly with how you fund aged care accommodation.
Related reading
- The Home Loan Repayment Formula, Worked Step by Step
- Bridging Finance: Buying Before You Sell
- Construction Loans: How Progress Payments Work
Sources
- Reverse mortgage and home equity release — ASIC Moneysmart
- Home Equity Access Scheme — Services Australia
Rates checked as at 2 September 2026. Interest rates, lender policies and government schemes change frequently. Figures in this article are illustrative and were accurate at the date shown.
General advice warning: This article contains general information only. It does not take into account your objectives, financial situation or needs, and it is not personal credit or financial advice. Consider whether it is appropriate for you and seek advice from a licensed credit representative before acting.
Any interest rate shown is an example only and is not an offer of credit. Where a rate is quoted, the applicable comparison rate is available from the relevant lender and should be considered alongside it.
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