Key Takeouts
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Australian reverse mortgages are governed by the National Consumer Credit Protection Act (2012), which provides you with strong consumer protections
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A reverse mortgage can provide you with access to income and capital, while allowing you to remain in the home and community you love as long as you wish
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A reverse mortgage provides you with flexibility and choice, and is designed to support your retirement goals
For some Australians, the term reverse mortgage can stir up a mix of emotions – and not always for the right reasons. Misunderstandings and outdated perceptions still linger, often shaped by stories from the early days of the product in the late 1990s and early 2000s.
Times have changed. Today’s reverse mortgages are a world apart from those early versions. Thanks to stronger consumer protections introduced under the National Consumer Credit Protection Act (2012) (NCCP), reverse mortgages are now among the most tightly regulated credit products in Australia. With clear safeguards in place for borrowers from start to finish, they offer a secure and flexible way for Australian homeowners to access the wealth tied up in their homes.
In this article, we’ll bust some of the common myths around reverse mortgages, and explain how using your home equity can be a powerful financial tool to support a more confident and comfortable retirement.
Myth One: I Can Lose My Home
You will not lose your home. Instead, retain the title to your home and can live there as long as you choose. There is no risk of default because you do not need to make regular repayments, and a lender cannot forcibly remove you from your home. You do, however, need to abide by the loan’s terms and conditions, which will generally include things like keeping up-to-date on insurance and rates payments and keeping your home well maintained.
Myth Two: I Could End Up Owing More Than My Home Is Worth
This is a furphy – owing more than your home is worth is not possible thanks to the ‘no negative equity guarantee’ (NNEG) clause in the NCCP. At the end of your loan, you cannot owe more than your home and property are worth, no matter what occurs to the value of your property.
Myth Three: I’m Disinheriting the Kids
One of the most common misconceptions about reverse mortgages is that they prevent you from supporting your family or leaving an inheritance. In reality, a reverse mortgage can actually enhance your ability to provide meaningful financial support when it’s needed most.
By accessing the equity in your home, you can assist your children or grandchildren during key life stages – such as helping them enter the property market or cover education costs – effectively becoming the “Bank of Mum and Dad.” With people living longer, retirement planning is evolving and many are choosing to give part of their bequest earlier, when it can make the greatest impact. A reverse mortgage gives you the flexibility to do just that, while still preserving future inheritance potential.
Myth Four: A Reverse Mortgage Is a ‘Last Resort’
For many retired Australians, the family home holds more wealth than their superannuation. A reverse mortgage unlocks this hidden value, giving you the ability to plan more effectively for retirement without selling the home you love. With a Reverse Mortgage from Pilbara Finance, you can access your home equity to enhance your lifestyle, boost your financial wellbeing and enjoy greater freedom and flexibility throughout retirement – all while continuing to live in your own home.
Myth Five: There’ll Be Nothing Left to Cover Aged Care Costs
The amount you can borrow with a reverse mortgage is based on the loan-to-value ratio (LVR), which takes into account your property’s value and the age of the youngest borrower. LVRs for reverse mortgages are designed to be conservative – for example, a Reverse Mortgage starts at 20% for someone aged 60, increasing by 1% each year thereafter.
This cautious approach helps to ensure you retain enough equity in your home to meet future needs, such as moving into residential aged care, giving you greater peace of mind and financial security as you age.
Myth Six: It’s Better to Get Equity from Your Home by Downsizing
Many Australian retirees are reluctant to downsize – and for good reason. Your home isn’t just a property, it’s a place filled with memories, connection to community and space to welcome family and friends. Beyond the emotional cost, selling a home can come with significant financial and social expenses. It can also affect your Age Pension entitlements. For these reasons, ageing in place and staying in your family home can often be a smarter and more fulfilling choice.
Myth Seven: I Already Have a Mortgage So I Can’t Get a Reverse Mortgage
In many cases, Pilbara Finance can help refinance existing home loans – including standard and reverse mortgages. Traditional bank mortgages require regular monthly repayments, which can place pressure on your cash flow in retirement and carry the risk of default if payments can’t be met.
At Pilbara Finance, we provide a range of flexible lending solutions built on the foundation of our Reverse Mortgage, a regulated mortgage that’s been designed to support your retirement goals. It offers flexible access to your home equity without ongoing repayments, helping you enjoy greater financial confidence in retirement. Every customer is protected under the NCCP, ensuring strong safeguards and peace of mind.
If you love your home and want to stay there throughout retirement, a Reverse Mortgage from Pilbara Finance can help you access the wealth in your home to boost your finances and enjoy retirement.
With the myths about reverse mortgages set straight, now’s the time to discover how a Reverse Mortgage could support your retirement. Fill out the form on the right or call 08 9122 3929.
