Reverse mortgages are loans designed specifically for older borrowers who are typically asset rich but cash poor. These loans were previously called senior's loans.

Reverse mortgages generally allow people from the age of 60 to convert the equity in their property into cash for any worthwhile purpose. Interest is charged the same as any other loan like any loan, however the borrower is not required to make repayments.

As with normal home loans, a reverse mortgage is secured by first registered mortgage over the borrower's house. The amount of equity that can be released is determined by age and the value of the security property. The borrower retains full ownership and is able to stay in their home as long as they want.

The interest is charged back to the loan account – and will compound over time ie; the balance of the loan will increase.

The debt, including all interest and fees owed, is repaid to the lender when:
• The borrower sells the property of their own accord, OR
• The borrower moves into aged care (not required with some lenders), OR
• The last surviving borrower dies

Reverse mortgage loan products are becoming more flexible and increasingly sophisticated as the market develops. It depends on which lender you choose, but at the moment the borrower can take the funds either as:
• a lump sum
• a regular income stream
• cash reserve
• or a combination of all