What Is a Reverse Mortgage?
A reverse mortgage lets eligible homeowners borrow money using their property as security, without making regular repayments while they continue living there.
Interest accumulates over time and is added to the outstanding loan balance. The loan is typically repaid in full – including compounding interest and fees – when the property is sold, the borrower moves into aged care, or the estate is settled after death.
For older Australians in Perth and across Western Australia, it’s often considered alongside the government’s Home Equity Access Scheme (HEAS), which operates through Centrelink and generally offers lower interest rates.
How Much Can You Borrow?
The maximum borrowing amount is tied directly to your age. According to ASIC’s MoneySmart guidance, at age 60 you can typically borrow between 15% and 20% of your home’s value, with roughly 1% added for each additional year of age.
| Age at Application | Approx. Max LVR | Example: $700k Home | Example: $900k Home |
| 60 | 15–20% | $105,000–$140,000 | $135,000–$180,000 |
| 65 | 20–25% | $140,000–$175,000 | $180,000–$225,000 |
| 70 | 25–30% | $175,000–$210,000 | $225,000–$270,000 |
| 75 | 30–35% | $210,000–$245,000 | $270,000–$315,000 |
| 80 | 35–40% | $245,000–$280,000 | $315,000–$360,000 |
*Actual limits depend on lender policy, property location, and individual circumstances.
How the Calculator Works
Enter your age (or the youngest borrower’s age for couples), your property’s estimated current value, and the amount you’d like to borrow. The calculator projects:
- Your estimated maximum borrowing limit
- How the loan balance will grow over time through compounding interest
- The projected equity remaining in your home at various points – typically 5, 10, and 15 years out
ASIC regulations under the National Consumer Credit Protection Act 2009 require that brokers and lenders use the government’s own MoneySmart reverse mortgage calculator to show you equity projections before proceeding to any formal assessment.
Negative Equity Protection: Your Legal Safeguard
Owing more than your home is worth is the most common worry people bring to reverse mortgage conversations – and it’s one Australian law directly addresses. Any reverse mortgage taken out since 18 September 2012 must include negative equity protection, which means if the sale proceeds don’t cover the full debt, the lender wears the difference. You and your estate are not liable for the gap.
While this protection prevents financial liability beyond the home’s value, it doesn’t stop compounding interest from significantly eroding equity over a long loan period – which is why running the calculator projections across different interest rate and property growth scenarios is important.
How Compounding Interest Affects Your Equity Over Time
A standard mortgage balance falls with every repayment. A reverse mortgage works the opposite way – because no repayments are made, interest accumulates on the original loan and then on itself.
At the rates private lenders are currently charging (roughly 8–9%), a $100,000 loan can exceed $200,000 in around eight to nine years, with no additional money drawn down.
In contrast, the government’s Home Equity Access Scheme (HEAS) charges a fixed rate currently well below the private lender market – making it worth comparing before committing to a commercial product.
Perth’s property market growth rate matters too: strong house price appreciation in suburbs like Claremont, Cottesloe, or South Perth can help maintain your equity position even as the loan balance grows
How It Affects the Age Pension
Taking out a reverse mortgage can affect your eligibility for the Age Pension. The impact depends on how you use the funds. A lump sum spent on an exempt asset (such as home renovations) may have a different effect than one deposited into a bank account, where it could be assessed under Centrelink’s assets test.
Services Australia’s Financial Information Service (FIS) provides free guidance on this – contact them on 132 300 before making any decision.
Frequently Asked Questions
1. Who is eligible for a reverse mortgage in Australia?
You generally need to be aged 60 or over and own your home outright or have significant equity. Most lenders require the property to be your primary residence in Australia.
2. Do I have to make regular repayments?
No. Repayments are not required while you live in the property. The loan, interest, and fees are repaid in full when the home is sold, you move into aged care, or after death.
3. What is the difference between a reverse mortgage and the HEAS?
The HEAS is a government-funded reverse mortgage available through Centrelink to eligible Age Pension–age borrowers, typically at a lower interest rate. Private reverse mortgages involve commercial lenders and may offer greater flexibility in borrowing limits and drawdown options.
4. Can I lose my home with a reverse mortgage?
You retain ownership and the right to remain in your home for life. The loan is not called in unless you voluntarily sell, permanently move out, pass away, or breach specific loan conditions.
5. Does Perth’s property market affect how much I can borrow?
The amount you can borrow is primarily based on your age and the current market value of your property. A higher property value – common in inner-ring Perth suburbs – can increase your maximum loan amount, though lender LVR caps still apply.
Speak with a Perth Mortgage Broker
A reverse mortgage is one of the more significant financial decisions a retiree can make. It’s worth comparing it carefully against other retirement income options, including the HEAS, downsizing, and drawing on superannuation. Central Lending Solutions is a Perth-based mortgage brokerage with over 20 years of experience. Our team can walk through the ASIC equity projections with you and help you assess whether this product fits your long-term plan. Call (08) 9201 8570 or explore our home loan refinance options if you’re considering alternative ways to access equity.