Page 5 - Wealth-Adviser-Issue-137 (FWP)

ISSUE 137
MAY 2026

THE HOME YOU’RE SITTING ON

Reverse Mortgages and the Government depositphotos.com

Scheme Almost No One Knows About

BY WEALTH ADVISER has shifted. Longer retirements, rising care costs, and an
evolving product market have made converting some home
argaret and David are 72 and 70. They own a debt- equity into retirement income a legitimate planning lever
free home in a Sydney suburb that recently valued rather than a last resort. Two products in particular do this
Mat $1.4 million. Between them they have $380,000 work, and most readers will only have heard of one of them.
in superannuation, drawing an account-based pension that
provides roughly $22,000 a year on top of their part Age Pen- Two products, two very different propositions
sion. Together the pension and the super cover their living Commercial reverse mortgages are loans secured against
expenses comfortably enough — but only just. The house the home, with no required repayments while the borrower
needs a new roof, David’s hip will eventually need replacing, lives there. Interest compounds on the balance. The debt
and they would like, before too much longer, to spend a seri- is repaid when the home is sold, when the borrower moves
ous amount of time travelling. permanently into aged care, or from the estate after death.
On paper, Margaret and David are wealthy. In practice, The loan amount is capped by a loan-to-value ratio that
almost all that wealth is locked inside the front door, and increases with the borrower’s age — starting at roughly 15 to
a great many Australians in their position face the same 20 per cent of the home’s value at age 60 and rising by about
arithmetic: a paid-off home worth seven figures, retirement one per cent per year, reaching around 35 per cent at age 80
savings worth a small fraction of that, and a standard of and up to around 50 per cent for those in their nineties. For
living constrained by the gap. Until quite recently, the dom- couples, the youngest borrower’s age sets the limit.
inant view in Australian financial advice was that the home The main commercial lenders in Australia are a small
was sacrosanct — you preserved it, bequeathed it, and didn’t group: Heartland Bank, Household Capital, and a handful of
draw against it unless you had no other option. That view smaller players including P&N Bank, Gateway Bank, Unity

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