Debt Consolidation Alternatives for Seniors

With property values continuing to rise across Australia, many over-55s are increasingly finding themselves asset-rich but cash-poor. Additionally, carrying high-interest debt (bad debt) into retirement can be a significant source of stress for older Australians. Lingering credit card balances, car loans, or personal loans come with mandatory monthly repayments, which can eat away at your superannuation and age pension income.

The Alternative to a Debt Consolidation Loan

Typically, when Australians are seeking the ‘best debt consolidation loans’, they are looking for either a new personal loan or mortgage refinance. These traditional options will require you to make monthly repayments in the form of principal and interest.

At Your Home Equity, we offer an alternative to a secured debt consolidation loan through a reverse mortgage. A reverse mortgage allows over-55s to consolidate loans and high-interest debts into a facility that is secured by the equity you have in your home.

Senior couple reviewing finances on laptop at home.

How Turning Debt Consolidation into a Reverse Mortgage Works

If you are over 55 and own, or largely own, your own property, you can use a reverse mortgage to refinance:

  • High-interest credit cards
  • Personal loans
  • Other mortgages
  • Medical expenses
  • Car Loans

While a reverse mortgage can be a great tool for debt consolidation and improving cash flow for older Australians, it is important to understand that a reverse mortgage is also a debt. Although mandatory monthly repayments are not required, the interest on your new consolidated reverse mortgage balance is compounding, meaning you will be paying interest on the interest as it is added to the total loan amount. As specialist brokers, we explain in detail how compound interest works and provide you with comprehensive modelling and projections of your home loan and equity position over time so you are fully informed before making any decisions.

Learn more about reverse mortgages

Frequently Asked Questions

Yes, it can. The main reason many older Australians enter into a reverse mortgage is as a form of debt consolidation. A reverse mortgage allows you to refinance high-interest credit cards and personal loans and replace those mandatory monthly payments with a loan that doesn’t require regular repayments.

Almost certainly. Credit cards are known to have high interest, often 18-25%. Consolidating debt into a reverse mortgage can help you save considerably with much lower interest rates. You can see our current rates here.

You can use a reverse mortgage to consolidate many types of debts, including existing loans, lines of credit, credit cards, personal loans, car loans, council and land tax, private debt and family loans; and even tax debts.

Yes, you can. One of the most common uses of a reverse mortgage is to refinance an existing home loan.

Drawing funds from your home to consolidate debt will reduce the amount of equity you hold in your home. What this means for your estate over time, however, will depend on how fast your property value increases compared to the growth of your loan balance. As specialist brokers, we provide all our clients with detailed modelling to demonstrate this.