Are reverse mortgages safe in Australia?

Are reverse mortgages safe?

This is one of the most common — and important — questions we hear.

There is an ongoing misperception that despite being a fully regulated financial product, somehow reverse mortgages aren’t “safe”.

The short answer is: yes, reverse mortgages are safe when used correctly and with the right guidance.

But like any long-term financial product, they come with important rules, protections, and considerations you need to understand.

Reverse mortgages in Australia: What the law says

Reverse mortgages are tightly regulated by:

• ASIC (Australian Securities & Investments Commission)
• The National Consumer Credit Protection Act
• Mandatory product rules introduced by the 2012 credit reforms

Here are some of the key legal protections:

1. No Negative Equity Guarantee (NNEG)

You can never owe more than the value of your home — even if the loan balance grows over time. This is required by law for all regulated reverse mortgages in Australia.

2. Mandatory Independent Legal Advice

Before proceeding, your solicitor must confirm you understand the loan structure and implications.

3. Detailed projections provided upfront

All lenders must give you a personalised reverse mortgage projection showing how the loan balance and home equity may change over time.

4. Cooling-Off periods and exit protections

You can withdraw within a set period if you change your mind.

What risks should I be aware of?

While reverse mortgages are regulated and safe, they may not be suitable for everyone. It’s important to be aware of:

• Compound interest: The loan grows over time as interest accumulates
• Reduced estate value: You’re using up some of the value in your home
• Pension impacts: In some cases, a reverse mortgage could affect your Centrelink benefits (i.e. if you take a lump sum of cash and put it in the bank or invest it)
• Future flexibility: A reverse mortgage is not easily “undone” if your circumstances change

That’s why it’s critical to get advice from someone who specialises in this space — and can help you understand the full picture.

When are reverse mortgages most safe?

They tend to work best when:

• You’re clear about your long-term plans (e.g. staying in the home)
• You only borrow what you need, not the maximum allowed
• You’ve considered how it affects your estate
• You’re using it for strategic needs (e.g. aged care, renovations, debt reduction)

How we help you use reverse mortgages safely

At Your Home Equity, we help you:

• Understand if a reverse mortgage is appropriate in the first place
• Compare safe, regulated commercial options
• Receive full projections before you commit
• Think through the long-term impacts on your income, Centrelink and family
• Access support after settlement as your needs evolve

Reverse mortgages are not dangerous — but they are complex.

With the right broker, proper advice, and a clear purpose, they can be a safe and sensible way to access the equity in your home.

Want to know if a reverse mortgage is right for you?
Book a free, no-pressure consultation with a specialist broker today.