If you’re a homeowner in Australia, particularly over 60, you may be sitting on a valuable financial resource: your home equity. But what if you’re not ready to sell or downsize? That’s where equity release could come into play, giving you access to that wealth while continuing to live in the home you love.
From reverse mortgages to home reversion schemes, equity release may allow you to tap into your property’s value while continuing to live in it. Whether you’re planning home renovations, helping your kids financially, or covering rising living costs in retirement, equity release could offer a flexible funding option.
But is it right for you?
At Unconditional Finance, we help you make sense of your options. Let’s unpack how equity release works in Australia, what types are available, the risks involved, and how to make a smart, informed decision that suits your long-term goals.
What Is Equity Release?
In simple terms, equity release allows you to access some of the value tied up in your home without having to sell it or move out.
Your equity is the difference between your property’s market value and what you still owe on your home loan. As you pay down your mortgage, or as your property’s value increases, your equity grows. Equity release lets you convert a portion of that equity into cash or income. Depending on your age and financial situation, you might have access to a few different structures, each designed with its own rules and flexibility.
This could come in the form of:
- A reverse mortgage
- A home reversion scheme
- An equity release agreement
- The government-backed Home Equity Access Scheme
- A home equity loan or cash-out refinance
Each option has distinct features, benefits, and risks. Choosing the right one depends on your age, goals, income, and home value.
How Does Equity Release Work in Australia?
Let’s break down the main types of equity release products available to Australian homeowners.
1. Reverse Mortgage
With a reverse mortgage, you can access funds by using your home equity as collateral, and you generally won’t need to make repayments while you continue living in the property. The loan, including any interest and charges, is typically repaid when the home is sold, you move into aged care, or your estate settles it after you pass away.
Key Features
- Available from age 60 (maximum loan typically 15–20% of home value at age 60, increasing with age).
- No mandatory repayments while you live in the home.
- Interest compounds over time, which means the amount owed grows quickly.
- You keep ownership of your home.
- Loans issued after 18 September 2012 include negative equity protection, meaning you won’t owe more than your home’s market value.
Risks to Consider
- Reduced home equity over time.
- Higher interest rates than standard home loans.
- Potential impact on Age Pension or aged care eligibility.
- Smaller inheritance for your family.
2. Home Reversion (Home Sale Proceeds Sharing)
Through a home reversion scheme, you can agree to transfer a portion of your home’s future value in exchange for a lump sum payment upfront. Unlike a loan, this isn’t debt-based. There’s no interest, but the trade-off is you forfeit a share of your property’s future appreciation.
How It Works
- You receive a discounted lump sum in exchange for selling a portion (e.g. 20–50%) of the future value of your home.
- You remain in your home for life, but the provider becomes a partial owner.
- When the home is eventually sold (either by you or your estate), the provider receives their percentage share of the sale proceeds.
Pros
- It’s not a loan, and there’s no interest to pay.
- You can continue living in your home rent-free.
Cons
- These are complex contracts, so careful legal and financial advice is essential.
- The provider’s share grows with the property’s value.
- You may not benefit from full future capital growth.
Tip: Ask for clear projections to understand how much of your home’s value you’re giving up.
3. Equity Release Agreements
An equity release agreement lets you sell a portion of your home’s value to investors and receive either a lump sum or instalment payments.
Unlike a reverse mortgage, this isn’t a loan. But you’ll pay periodic fees (like rent) on the portion of your home you’ve sold.
Features
- The investor’s share of equity increases over time.
- Your own share decreases as fees accumulate.
- On sale of the home, the investor takes their share, and you or your estate get the rest.
Considerations
- No interest, but the loss of equity can be significant.
- Risk of having little or no equity left over time.
- Ensure you can stay in your home even if your share reaches zero.
Get both legal and financial advice before entering one of these contracts, as they often include detailed fee schedules and value projections that aren’t always easy to interpret.
4. Home Equity Access Scheme (HEAS)
The Home Equity Access Scheme, run by Services Australia, is a government-administered loan that allows eligible older Australians to supplement their retirement income by drawing against their home equity.
Highlights
- You can receive non-taxable fortnightly payments, a lump sum, or both.
- Interest is set at 3.95% p.a., and compounds each fortnight.
- The loan is secured against your property, but negative equity protection applies, ensuring you never owe more than the value of your home.
- Available to people of Age Pension age, regardless of whether you’re currently receiving the pension.
This scheme is a low-risk alternative to private sector equity release, with transparent terms and predictable repayments. It’s worth considering if you prefer the backing of a government program with built-in safeguards.
What About a Home Equity Loan or Equity Release Loan?
Not all equity access solutions are designed for retirees. If you’re still working and have a steady income, a home equity release loan, often called a cash-out refinance, might be a more straightforward option. This typically works as a top-up or separate loan based on your usable equity. It’s available to borrowers of all ages, not just retirees.
You’ll need to:
- Maintain regular repayments.
- Meet credit and income criteria.
- Usually keep at least 20% equity in your home after borrowing.
This option may suit younger homeowners or investors planning renovations, debt consolidation, or buying another property.
For example, if your home is worth $800,000 and you owe $300,000, your usable equity may be around $340,000 (80% of value = $640,000, minus existing loan).
What Can Equity Release Be Used For?
Equity release is often used to improve quality of life, ease financial pressure, or support loved ones. While the funds are yours to use as you wish, here are some of the most common ways Australians apply them, along with real-life scenarios where it may make sense.
1. Covering everyday living costs in retirement
For many older Australians, the pension alone isn’t enough. Equity release can supplement income to cover groceries, utilities, or transport. This may support your independence and help maintain your current lifestyle for longer.
2. Home modifications or maintenance
Whether it’s installing a walk-in shower, widening doorways for mobility access, or simply keeping up with repairs, using your home to fund its upkeep is a common and practical use.
3. Medical expenses or aged care needs
Health costs can add up quickly. Think specialist fees, dental work, mobility equipment, or in-home care. Some use equity to bridge these gaps without dipping into superannuation or selling assets.
4. Helping adult children or grandchildren
From contributing to a child’s house deposit to helping fund uni or TAFE for the grandkids, intergenerational support is a powerful motivator. Equity release allows some retirees to “give while living,” if they can afford it.
5. Debt consolidation
If you’re juggling credit card debt, personal loans, or car finance, accessing home equity may help you consolidate into one lower-interest facility. But it’s crucial to ensure repayments remain manageable.
6. Buying a second property or investment property
Some homeowners use their equity to purchase an investment property, either for long-term wealth building or to generate rental income in retirement.
7. Funding a one-off expense or life goal
Whether it’s a dream trip, a reliable new car, or helping pay for a loved one’s wedding, equity release can offer the flexibility to fund major expenses without liquidating other investments.
Tip: It’s wise to talk to a mortgage broker or financial adviser before releasing equity, to ensure the purpose aligns with your broader goals and financial health.
What Are the Risks and Downsides of Equity Release?
While equity release can be helpful, it’s not a decision to take lightly. Risks include:
- Compounding interest can significantly reduce your equity over time.
- Reduced inheritance for your family.
- Impact on government benefits, such as the Age Pension.
- Complex contracts that can be hard to understand, especially in older individuals.
- Greater long-term costs compared to other forms of borrowing.
⚠️ Important: Always get independent financial advice before signing any equity release agreement. Legal advice is often required, but financial advice helps determine whether the product is truly in your best interest.
Alternatives to Equity Release
Before committing, consider other options:
- Downsizing to a smaller home
- Accessing government payments or benefits
- Using superannuation
- No interest loans for essential items
- Budgeting support services
Is Equity Release Right for You?
Equity release can be a powerful way to unlock value from your home, especially if you’re looking for more financial breathing room later in life. But it’s not always the right fit, and it’s important to weigh both the benefits and the trade-offs carefully.
Ask yourself:
- Do I need a lump sum or regular income?
- Can I afford reduced equity in the future?
- Will this affect my government benefits or family?
- Have I explored all alternatives?
By getting the right advice, understanding the options, and thinking long-term, you can make a confident, informed decision.
Need Guidance?
If you’re considering a home equity release, a licensed mortgage broker can help you explore your options, compare lenders, and explain the finer details so you don’t run into unexpected issues down the track.
Ready to chat about your equity release options? Book a consultation today to get personalised, expert guidance from someone who understands the Australian mortgage landscape.
Frequently Asked Questions (FAQs)
It can be suitable for the right person in the right situation. It may help you stay in your home longer, improve your lifestyle, or support your retirement income. But it comes with long-term trade-offs. Carefully assess your goals, alternatives, and the implications before proceeding.
That depends on your age, the value of your home, and the product type. For a reverse mortgage, lenders typically offer:
- 15–20% of your home’s value at age 60
- An additional 1% per year over 60
Other schemes vary widely. Use an online calculator (e.g. from Westpac or NAB) to estimate your usable equity.
Yes, if it’s a loan-based product like a reverse mortgage or HEAS loan. Interest typically compounds over time. You don’t pay interest on home reversion or equity release agreements, but you do lose part of your future home value.
That depends on the interest rate and term. For example, at 6.5% interest over 15 years, your monthly repayment would be around $870. Speak to a broker or use a loan calculator to get accurate figures for your situation.
The loan (plus interest) or the share of home equity sold is repaid from your estate when the home is sold. Ensure your family or beneficiaries are aware of how the product works and any impact it may have on inheritance.
Not a “catch”, but there are often complex conditions and long-term consequences. It’s not free money. It’s your home’s value, paid to you early, so it’s important to understand what you’re signing and get advice.
