Are reverse mortgage interest rates fixed or variable?

Reverse mortgages are variable rate loans that can come with all the flexibility of variable rate loans, such as an offset account and the ability to make repayments if you choose to pay down the principal sum you borrow. This may be a relevant option for those borrowers who are in their 80s, still have an income from superannuation and wish to reduce their reverse mortgage to leave more inheritance equity to their children.

Do you have to be retired to get a reverse mortgage?

No – you don’t have to be fully retired, but most lenders have a minimum age limit of 60 years to be considered for a reverse mortgage. The older you are when applying for a reverse mortgage, the more of your home equity you’ll be able to access.

Do I have to own my home completely to get a reverse mortgage?

No – you don’t have to have paid off your home loan completely, but you will require a substantial amount of existing home equity . A lender may also make it a condition that you use part of the lump sum payout from a reverse mortgage to clear off your original home loan.

Who offers reverse mortgages in Australia?

After the findings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry were published in February 2019, most of the major banks stopped offering reverse mortgages. In 2022 most reverse mortgages are offered by specialist online lenders and credit unions.

Will a reverse mortgage affect my Centrelink aged pension?

Yes – all income you receive contributes towards the income thresholds to receive a Centrelink aged pension. For this reason, it is vital to get independent financial advice from a trusted accountant or financial planner before deciding to take out a reverse mortgage.

Can I renovate my home when I have a reverse mortgage?

Yes – however, some lenders will specify that you must notify them and seek permission before making any renovations or improvements to the property. This is because the reverse mortgage is based on the value of your home, so a lender will want to know if you’re planning to do anything that will affect the sale value of your property.

If I have a reverse mortgage and I pass away, will my spouse still be able to live in our house?

This will depend on whether both you and your spouse are listed on the loan agreement (which you should both be if you are living as a married couple). Reverse mortgages come with guarantees that all named persons on the loan agreement can continue living in the property if one of the couple passes away. However, if the name of only one person in a couple is on the loan agreement, the lender could ask for the property to be sold if that one borrower dies.