Reverse mortgages and the Home Equity Access Scheme

How a reverse mortgage works

Moneysmart (page updated 18 June 2026) describes a reverse mortgage as borrowing against the equity in your home when you are 60 or older. You can take the money as an income stream, a line of credit, a lump sum, or a combination. You make no repayments while you live there. Interest compounds, so the debt grows, and Moneysmart says the rate is likely to be higher than on a standard home loan. The debt is repaid in full when you sell, move out, or your estate sells the home.

Moneysmart says how much you can borrow depends on your age and the value of your home, and that the amount is typically a smaller share of the home's value at 60 than at older ages. Lenders' limits and minimums differ, so check each lender's own terms. Costs depend on how much you borrow, how you take it, the rate and fees, and how long the loan runs. Moneysmart notes a lump sum costs more because of compounding.

The Home Equity Access Scheme

Services Australia runs the Home Equity Access Scheme (the page was last updated 5 September 2025). It is a voluntary, non-taxable loan for people who are Age Pension age or older. You use equity in Australian real estate as security. You can take the loan as a fortnightly amount, an advance lump sum, or a combination of both, and you repay it with interest and legal costs.

What the official pages say, as at the date checked:

Services Australia also says the longer you take to repay, the more interest accumulates. Moneysmart adds that the scheme was formerly called the Pension Loans Scheme and that the no negative equity guarantee has possible exceptions, so read the terms before applying. Services Australia has calculators that estimate your maximum loan and what a loan might look like in future. Rates and rules can change, so confirm the current rate on the Services Australia page before you decide. Veterans apply through the Department of Veterans' Affairs.

How the interest compounds: an illustrative example

This is RateSonar's own arithmetic, not a quote and not a market rate. Assume you borrow $100,000 as a lump sum, make no repayments, and the interest rate is an assumed 8% a year, compounded annually. Real loans compound more often and add fees, so a real balance would be higher.

At that assumed rate, the debt just under doubles in nine years. The longer the loan runs, the more of the balance is interest on earlier interest. Compare that with the 3.95% stated for the Home Equity Access Scheme: a lower rate grows more slowly, though it still compounds. For context only, the lowest advertised standard owner-occupier variable rate across lenders was 5.69% as at 2 Nov 2026, and the middle rate was 6.74%. Reverse mortgage rates are usually set higher than these, according to Moneysmart. See the live home loan rates board for the current figures.

Moneysmart's own worked example uses a $500,000 home, $1,000 in set-up fees, a 7% interest rate and 3% annual growth in the home's value. After 15 years the home is worth $779,984, the owners still own 54% ($420,016) and owe the lender 46% ($358,967). Moneysmart's calculator and a lender's projection show the same effect for your own numbers.

Negative equity protection and your rights

Moneysmart says reverse mortgages taken out since 18 September 2012 have negative equity protection: you cannot end up owing the lender more than your home is worth. It says loans taken out before that date may not include it, so check your contract. The Home Equity Access Scheme has its own no negative equity guarantee, as Services Australia states.

I could not verify the detail of ASIC guidance or the specific provisions of the National Consumer Credit Protection Act on the pages checked, so this guide does not describe them. Ask your lender which protections apply to your contract, and read the contract with a solicitor.

Age Pension and other effects

Moneysmart says to consider how releasing equity affects your Age Pension or other government benefits, your ability to pay for aged care, future living and medical costs, home maintenance, what you leave to others, and whether anyone living with you can stay in the home. Its page points you to the Services Australia Financial Information Service to explain pension effects. Do not assume the answer. Ask before you apply, and get it in writing where you can.

Questions to ask before you sign

• What is the interest rate, is it fixed or variable, and what are all fees, including set-up and ongoing fees?
• Can you see a projection showing how your debt and your remaining equity change over time? Moneysmart says lenders must show projections and suggests you take a copy away.
• Does the loan have negative equity protection, and are there exceptions?
• What happens if you move into aged care, or if one partner dies or leaves the home?
• Can you make voluntary repayments, or protect part of your equity?
• How does this change your Age Pension or other payments?
• Have you had independent advice from a financial adviser or legal professional?

Alternatives

Moneysmart lists these before taking equity out of the home: check whether you are eligible for the Age Pension or other government benefits; a no interest loan for small essential purchases; downsizing, which may free up equity but brings buying and selling costs and may affect benefits; and free help services if you are struggling. If you are mainly short of cash for repairs or costs, a smaller or temporary measure may do less damage to your equity. See also using home equity to renovate or invest, struggling with mortgage repayments and how lenders assess serviceability. To compare standard lenders if you still have a mortgage, use compare rates.