Reverse mortgages: What are they and how do they work?

With cost-of-living pressures still an issue, many Australians are finding it difficult to make ends meet and it can be even tougher if you’re retired.

While you may own a home that’s soared in value over the years, your retirement income is unlikely to have kept pace with rising household bills.

If you find yourself asset rich but income poor, one solution can be to unlock some of the money tied up in your home through a reverse mortgage. These financial products work a bit like a traditional home loan – but in reverse.

It’s a strategy being used by growing numbers of people over age 60 to top up their income from super and the Age Pension in retirement, or to pay for lumpy expenses like holidays or a new car.

What are reverse mortgages?

A reverse mortgage allows you to borrow money against the equity you have built up in your home, that is, the value of your home less any mortgage debt.