For most older Australians the family home is the largest asset by far, and it is largely exempt from the Age Pension assets test. That combination makes it both a source of security and a source of frustration: plenty of retirees are asset-rich and income-poor, while people in their late fifties who want to buy, upgrade or refinance find that lenders ask pointed questions about retirement.
This page covers both situations. The first half deals with conventional home loans for borrowers over 55, including bridging finance and downsizing. The second compares the two main ways to release equity without selling: commercial reverse mortgages and the Commonwealth's Home Equity Access Scheme.
Conventional home loans for borrowers over 55
There is no maximum borrowing age in Australian law, and the Age Discrimination Act prevents lenders from refusing on age alone. Under the NCCP's responsible lending obligations, however, a lender must assess whether you can meet repayments without substantial hardship, including after foreseeable changes such as retirement. Banks also apply a serviceability buffer, testing repayments at a rate around three percentage points above the actual rate, in line with APRA's expectations.
The exit strategy question
If a loan term would run beyond your expected retirement, the lender will ask for an exit strategy: how the balance will be repaid or the repayments maintained. Acceptable answers usually include downsizing to a cheaper home, using superannuation once you reach your preservation age, selling an investment property, or continuing income from a defined-benefit pension. Vague plans, such as working "as long as I can", tend to lead to shorter terms or smaller loans.
Bridging finance when moving
Older buyers often purchase their next home before selling the current one. A bridging loan covers the overlap, typically for six to twelve months, with interest often capitalised. The lender values both properties and calculates a peak debt; the end debt after the sale must be serviceable on your income.
The downsizer contribution
From 55, Australians who sell a home they have owned for at least ten years can contribute up to $300,000 each from the proceeds into super, outside the usual caps. It is not a loan, but it often shapes the financing of the next purchase, because putting money into super changes how much remains for the new property.
Equity release compared
| Feature | Home Equity Access Scheme | Commercial reverse mortgage | Home reversion |
|---|---|---|---|
| Provider | Commonwealth, via Services Australia or DVA | Licensed lenders such as Heartland, Household Capital, Greater Bank | Specialist providers in some cities |
| Minimum age | Age Pension age (67) | Usually 60, youngest borrower | Varies, often 60+ |
| Interest or cost | 3.95% a year, compounding fortnightly | Market variable rates, higher than home loans | Discount on the share of future value sold |
| How much | Up to 150% of the maximum pension a year, minus any pension received | Rises with age; for example 20% of value at 60, plus about 1% per year | Depends on share sold |
| Lump sums | Up to 50% of the annual maximum pension | Yes, plus lines of credit or regular draws | Lump sum |
| Negative equity | No negative equity guarantee | Statutory protection on contracts since 2012 | Not applicable |
The figures for commercial lenders follow Household Capital's published approach, which requires the youngest borrower to be 60 and a property worth at least $600,000 in an eligible postcode; other lenders use similar age-based ratios with their own minimums.
Rules that protect reverse mortgage borrowers
Since 2012 the National Credit Code has required reverse mortgages to include negative equity protection, so you or your estate will never owe more than the home's value, provided the contract terms are kept. Before signing, the lender or broker must give you projections of how the debt and your equity could change over time, using ASIC's reverse mortgage calculator on Moneysmart, along with a reverse mortgage information statement. Many lenders also require you to obtain independent legal advice.
Effects on the Age Pension
Money drawn under the government scheme is not counted as income for the Age Pension. How a commercial reverse mortgage lump sum is treated depends on what you do with it: cash that stays in an account counts as a financial asset and is deemed to earn income. Ask Services Australia's Financial Information Service, which is free, before you draw large sums.
Worked examples in Australian dollars
Refinancing at 59, Geelong. Mark and Julie owe $280,000 and want a lower rate. A 25-year term would run to 84, so the new lender offers 15 years, asking for an exit strategy. Their plan to sell and downsize at around 67, backed by a $1.1 million valuation, is accepted. Repayments at about 6% over 15 years are roughly $2,360 a month, within their combined salaries.
Government scheme at 70, Wollongong. Joan, a single full pensioner who owns her unit, draws an extra $10,000 a year under the Home Equity Access Scheme for ten years. At 3.95% compounding fortnightly, the debt reaches roughly $120,000 by the end of the decade, a modest share of a property worth $700,000.
Reverse mortgage at 75, Brisbane. Tony, 75, borrows $100,000 to renovate for accessibility and clear a car loan. If the rate averaged 9%, the balance would grow to about $237,000 after ten years. Against a house valued at $950,000, his estate would still keep most of the equity, and the statutory protection means it could never owe more than the sale price.
Common mistakes with later-life property finance
- Choosing the maximum term without a believable exit strategy, then facing a refusal or a reduced loan.
- Drawing a large reverse mortgage lump sum and leaving it in the bank, where it accrues interest and may affect the pension.
- Overlooking the government scheme, whose rate is often well below commercial reverse mortgage rates.
- Failing to discuss equity release with family, leading to disputes when the estate is settled.
- Letting insurance or council rates lapse, which can breach the loan contract.
- Assuming a retirement village unit can secure a loan: many cannot because there is no land title.
Alternatives to borrowing against the home
Downsizing releases equity without interest, and the downsizer contribution can move part of the proceeds into super. Renting out a room or granny flat brings income, though it may affect the pension. Some states run seniors' rates deferral schemes through local councils. And if debts are the real problem, a free financial counsellor from the National Debt Helpline can negotiate with lenders before any equity is used.
Getting advice
Credit advice on reverse mortgages must come from a licensed credit provider or broker. For the broader picture, including Age Pension effects and estate planning, a licensed financial adviser or the free Financial Information Service is worth consulting.
How to approach a later-life property decision
- Decide whether you want to stay, move, or release equity while remaining in the home.
- For a new or refinanced home loan, write a dated exit strategy and gather evidence for it.
- For equity release, run the Moneysmart reverse mortgage calculator with several rates and ages.
- Compare the Home Equity Access Scheme with at least one commercial reverse mortgage.
- Check Age Pension effects with Services Australia before drawing funds.
- Obtain independent legal advice and involve your family before signing.
Questions older homeowners ask
Will a bank give me a 30-year home loan at 60? Some will, if your exit strategy is credible. Others will shorten the term so it ends nearer retirement.
Is the government scheme always the cheaper choice? Its 3.95% rate is usually lower than commercial reverse mortgage rates, but the amounts are capped by pension-linked limits, so a large one-off sum may still require a commercial product.
Can I be forced out of my home with a reverse mortgage? Not while you comply with the contract. The lender can call the loan only for specified events, such as failing to insure or maintain the property; otherwise you stay until you die, sell or move out permanently.
Do my children inherit the debt? No. The loan is repaid from the property's sale, and the negative equity protection caps the debt at the home's value.
Can I make voluntary repayments? Yes. Both the government scheme and most commercial products allow it, which can slow the growth of the balance.
Organisations and offers to contact
- Household Capital : Australian reverse mortgage lender for homeowners whose youngest borrower is 60 or older, with borrowing limits rising by age.
- Services Australia: Home Equity Access Scheme : Official page on the government loan for people of Age Pension age, its 3.95% rate and the no negative equity guarantee.