03 Jun 2025 Reverse Mortgages Explained for Seniors: What They Are and How They Work

Reverse mortgages are a special kind of loan that lets homeowners convert part of the value of their homes into extra cash without leaving the comfort of their property. For Melbourne seniors, this can be an appealing way to cover daily costs, and medical bills, or simply enjoy life a little more in retirement.

Our guide is tailored specifically for Melbourne seniors, where local rules, property market trends, and lifestyle factors can make a real difference in how these loans work. Understanding these details is key to making a smart choice that fits your long-term plans.

This complete guide covers everything you need to know about reverse mortgages, from how they work and who can apply, to the key benefits and other considerations you’ll want to keep in mind. Let’s dive in!

Need Help with Your Reverse Mortgage Application?

Melbourne mortgage brokers at EverLend can help seniors understand the fine print, complete the necessary forms, and find the best reverse mortgage products to meet their retirement needs. Call 03 7036 3356 or visit everlend.com.au to start your application journey with confidence!

 

What Is a Reverse Mortgage?

A reverse mortgage is a type of loan designed for Australian homeowners, typically those aged 60 and above, who want to unlock some of the value in their home without moving out. Unlike a traditional mortgage, where you make monthly repayments to reduce the loan over time, a reverse mortgage lets you convert part of your home’s equity over time into cash or a regular income stream.

The amount you can borrow depends on factors like your age, your home’s value, and the loan balance already on your property. 

Importantly, Australian law requires all reverse mortgages to include a negative equity guarantee (also called negative equity protection). This means you (or your estate) will never owe more than the eventual sale value of your home, even if the loan balance grows beyond that.

In Melbourne, as elsewhere in Australia, reverse mortgages are regulated by the Australian government under the National Consumer Credit Protection Act 2009 (NCCP Act). This ensures responsible lending, fair loan terms, and consumer protections tailored to seniors.

In short, a reverse mortgage differs from a standard home loan because it doesn’t require immediate repayments. The loan balance increases over time, and the debt is usually repaid when the home is sold or when the borrower no longer lives there as their primary residence.

 

How Reverse Mortgages Work

When you take out a reverse mortgage, the funds can be paid out in different ways. You can receive a lump sum, regular payments (monthly or fortnightly income stream), a line of credit to draw on when needed, or a mix of these.

Interest is charged on what you use and compounds over time, meaning the amount you owe grows if you don’t make any voluntary repayments. The loan balance is typically repaid when you sell your home, move into aged care, or pass away.

Here’s a simple scenario:

• Let’s say you’re 70 and own a home worth $900,000 in Melbourne.

• You might be able to borrow up to 25% of your home’s value — $225,000.

• If you draw $100,000 as a lump sum, interest adds to the loan each year, growing the loan balance over time.

A mortgage calculator can help you see how this grows over the years so you can make an informed decision about your retirement lifestyle. 

 

Who Can Apply for a Reverse Mortgage?

Reverse mortgages aren’t for everyone, but they’re a valuable option for many seniors in Melbourne. Let’s take a closer look at the key eligibility criteria.

Eligibility Criteria for Reverse Mortgages

To apply for a reverse mortgage loan in Melbourne, you’ll need to meet a few important conditions:

• Age: You must be at least 60 years old, although some lenders might set a higher minimum borrowing age.

• Homeownership: You need to own your home outright or have a small existing loan balance that can be paid off using the reverse mortgage funds.

• Primary Residence: The property must be your primary residence. Holiday homes and investment properties aren’t typically eligible.

• Property Title and Standards: Your home must be located in Australia and meet the lender’s property title and security criteria.

• Council Rates and Insurance: Some lenders require proof of up-to-date council rates and property insurance to protect the home’s condition and value.

• Existing Debts: Lenders may also look for any outstanding council rates, strata fees, or other charges linked to your property.

• Financial Situation: Your overall financial situation and ability to cover future living expenses are reviewed to ensure the loan is a safe and responsible choice.

• Borrowing Limits: Using a reverse mortgage calculator, lenders will figure out how much you can access based on your age, the home’s value, and local lending policies.

 

Pros and Cons of Reverse Mortgages

Like any financial product, a reverse mortgage has both benefits and drawbacks. It’s important to weigh these carefully to see if it aligns with your retirement goals and lifestyle.

Pros:

• Offers a steady income stream to support your retirement lifestyle or cover medical expenses.

• Lets you stay in your home while using your biggest asset for regular payments or a lump sum.

• No need for monthly repayments. You repay the loan when you sell, move into aged care, or pass away.

• Interest is capped by the negative equity guarantee, giving you and your family peace of mind.

Cons:

• Interest compounds over time, growing the loan balance and reducing your home’s equity.

• It can impact your deceased estate and reduce what you leave to family members.

• Establishment fees, ongoing charges, and other costs can add up.

• May affect your eligibility for some government benefits (like the assets test for the age pension).

This balanced view helps you understand the trade-offs and decide if this financial product fits into your financial future.

 

Need help figuring out if a reverse mortgage is right for you? EverLend’s Melbourne mortgage brokers can guide you through the process, ensuring you get clear answers and professional advice tailored to your needs. Call us on 03 7036 3356 or visit everlend.com.au to start the conversation today!

 

How to Apply for a Reverse Mortgage

Applying for a reverse mortgage is a straightforward process, but it involves a few important steps. Let’s break it down so you’re clear on how to access your retirement income and protect your financial future.

1. Seek Financial Advice and Legal Advice

Before starting, it’s essential to get financial advice from a trusted adviser to see how a reverse mortgage fits into your goals and cash flow needs. You’ll also need legal advice to make sure you understand the equity release loans and their long-term impacts.

2. Connect with a Melbourne Mortgage Broker

Working with expert brokers, such as the team at EverLend, can make the process simpler. They’ll help you compare reverse mortgage products, ensure you meet the lender policy requirements, and explain how your loan proceeds can support your retirement income.

3. Calculate Your Maximum Loan and Projections

Lenders use reverse mortgage projections to figure out your maximum loan based on your age, property value, and lender policy. Using a reverse mortgage calculator, you’ll see how your equity loan and loan balance might grow over time.

4. Submit Your Application and Documents

You’ll need to complete the application form, providing proof of age, homeownership, and financial situation. Lenders will also check your cash reserve and other obligations to make sure the loan is a good fit.

5. Loan Establishment and Costs

Once approved, the loan establishment process kicks in. Expect establishment fees (usually around $1,000–$2,000), legal advice costs (approx. $300–$600), and possibly application fees depending on the lender. These can often be added to the loan proceeds if needed.

6. Approval and Settlement

If everything’s in order, the lender will approve the loan. Settlement involves signing final documents, and your equity release loan will then be advanced to you as a lump sum, monthly payments, or regular repayments (like fortnightly payments).

 

Chat with EverLend’s Melbourne brokers today to see how a reverse mortgage can support seniors. Call 03 7036 3356 or visit everlend.com.au to see how we can help you meet your financial goals and enjoy a comfortable retirement! 

 

Frequently Asked Questions (FAQs)

What is the 95% rule on a reverse mortgage?

The 95% rule means your total debt (including interest) won’t exceed 95% of your home’s house price when sold, protecting you and your estate. It’s part of the negative equity guarantee that ensures lenders offer competitive rates and protection.

What is the maximum amount you can borrow with a reverse mortgage in Australia?

Borrowing limits depend on your age, property prices, and mortgage lender policies. Typically, seniors can access up to 45% of their home’s value.

What is the negative part of a reverse mortgage?

The main drawback is that interest compounds over time, reducing the equity left in your home and potentially impacting your estate’s quality of life and inheritance plans.

How much can I borrow with a reverse mortgage?

The amount varies based on your age and the current house price, usually between 15% and 45% of your home’s value. Each lender has different borrowing limits.

How do you repay a reverse mortgage?

You repay the reverse mortgage when you sell your home, move into long-term care, or pass away. It’s designed as a flexible option to give you financial freedom during retirement.

How do reverse mortgages differ from home equity loans or lines of credit?

A reverse mortgage doesn’t require regular repayments, and the loan amount increases over time. In contrast, a home equity loan or line of credit usually requires monthly repayments and has a fixed term.

Can you lose your home with a reverse mortgage?

As long as you meet the mortgage lender’s loan terms and keep up with maintenance and rates, you can stay in your home. It’s a flexible option to use your home’s equity while preserving your quality of life.

 

Wrapping It Up

A reverse mortgage can be a smart way for seniors to turn their home’s value into extra cash for daily needs, future plans, or simply to enjoy retirement with more confidence. It’s not the same as your typical home loan, and that’s why talking to a broker can really make a difference. 

At EverLend, our Melbourne-based brokers (right here in St Kilda, serving the wider Melbourne community) are here to give you free consultation and clear answers every step of the way. From understanding your options to managing the paperwork, we’re committed to helping seniors make decisions that work for their lifestyle and financial future. 

Give us a call at 03 7036 3356 or visit everlend.com.au to see how we can support your retirement goals!