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Renovations can make a home safer and more comfortable in retirement, and an Australian homeowner may be able to fund them with a reverse mortgage while continuing to live there. But the money is borrowed against the home: interest compounds, the debt reduces the equity left for future needs or inheritance, and repayment is generally due when the home is sold or the borrower leaves permanently. Compare the government Home Equity Access Scheme and other ways to fund the work before committing.
Can I use a reverse mortgage to pay for renovations in retirement?
Yes. A reverse mortgage lets an eligible homeowner borrow against their home without making regular repayments in the usual way, and the funds can be used for home improvements. It is a secured loan, not a grant: interest and fees increase the amount owed, which is generally repaid from the sale of the home when the borrower moves permanently or dies.
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Access may be as a lump sum, a line of credit, regular payments or a combination. A line of credit or staged withdrawals can help avoid borrowing more than the renovation budget requires. Services Australia says interest is charged only on amounts drawn rather than the full available limit; confirm how a specific lender calculates interest and fees before choosing a facility.
How much might be available?
ASIC Moneysmart’s 2026 guidance gives indicative maximums of 15–20% of a home’s value for a 60-year-old and 20–25% for a 65-year-old. These are not lender offers or guaranteed limits: age, property, location and lender policy affect the amount. Moneysmart also describes about $10,000 as a typical minimum borrowing amount, with variation by lender.
Because the available amount and total cost depend on the borrower and the loan terms, request a written projection rather than treating an online estimate as a quote.
What will a reverse mortgage cost over time?
The central cost is compounding interest: interest is added to the balance, and later interest can accrue on that larger balance. Fees may also apply. Services Australia’s 2026 guidance says reverse-mortgage rates can reach 8% or more; actual rates and charges vary, so check current terms directly with the lender.
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ASIC Moneysmart’s 2026 illustration shows why the time horizon matters. It assumes a $500,000 home, a $125,000 lump-sum loan (25% of the home’s starting value), $1,000 in setup fees and a 7% default rate. After 15 years, assuming the property grows by 3% annually, the illustration projects a property value of $779,984, homeowner equity of $420,016 (54%) and a lender balance of $358,967 (46%). It is a scenario, not a forecast: different rates, fees, growth and borrowing patterns produce different outcomes.
Borrowing also reduces equity available for future living expenses, aged care or an estate. Do not assume that property-price growth will keep pace with compounding debt. Ask for projections under more than one interest-rate and property-value scenario, including a slower-growth case.
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Is the Home Equity Access Scheme cheaper?
It may have a lower published interest rate than a commercial reverse mortgage, but eligibility and payment limits matter. Services Australia’s 2026 page shows a rate of 3.95% per annum and example maximum fortnightly top-ups of $1,768.05 for singles and $2,665.50 for couples. Rates, thresholds and eligibility rules can change; check the current government terms before relying on those figures.
The scheme is a government loan, generally paid fortnightly, with a possible lump-sum advance. Interest accrues and repayment is made from the property or estate. Compare how much you qualify to receive, when funds arrive, and the projected total balance—not the rate alone.
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| Option | How funds arrive | Main cost or trade-off | What to compare |
|---|---|---|---|
| Reverse mortgage | Lump sum, line of credit, regular payments or a combination | Compounding interest and lender fees reduce remaining equity | Projected debt and equity under different rates, property values and time periods |
| Home Equity Access Scheme | Fortnightly government loan payments; a lump-sum advance may be available | Eligibility limits, accrued interest and repayment from the property or estate | Eligibility, payment level and current government rate |
| Home reversion | Lump sum in exchange for a share of future sale proceeds | No loan interest, but the provider receives its agreed share of future sale value | Cash received now versus future value surrendered |
| Equity-release agreement | Lump sum or instalments in exchange for a portion of home value | Fees reduce equity and may consume more of it over time | Fee structure and estimated residual equity |
| Downsizing or other assets | Sale proceeds from the home or another asset | Moving and transaction costs, plus possible effects on benefits | Housing needs, total costs and desired inheritance |
How should I plan renovation borrowing?
Decide what work is necessary, what it costs, and how much borrowing is genuinely needed before choosing a product. Use this sequence to keep the construction plan and financing decision aligned.
- Separate essential work from upgrades. List safety, accessibility and maintenance needs apart from discretionary improvements. This makes it easier to defer non-urgent work if the financing cost is too high.
- Get realistic quotes and stage the budget. Ask contractors to identify the scope, timing and payment milestones. Build a contingency into the project budget without borrowing an unnecessarily large lump sum.
- Match withdrawals to payments. Consider a smaller drawdown or line of credit if available. Confirm the lender’s rules, fees and interest treatment for unused credit and later withdrawals.
- Request projections, not just an advertised rate. Use the ASIC Moneysmart calculator and ask lenders for written projections using different interest rates and property-value assumptions. Include the planned borrowing amount and any fees.
- Check personal and estate implications. Get independent advice about Age Pension circumstances, aged-care affordability, occupancy requirements and the effect on inheritance before signing.
- Keep a reserve. Set aside funds for medical costs, future maintenance and care rather than committing all available equity to renovations.
What should I check before signing?
Review the contract and projected balance with an independent financial or legal adviser. In particular, establish when repayment can be required, how the rate can change, what fees apply, and how a move into care or a change in who lives in the property affects the loan.
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- Negative-equity protection: ASIC Moneysmart’s cited guidance says this protection applies to reverse mortgages taken out from 18 September 2012. Older contracts need to be checked individually; do not assume they include the same protection.
- Future flexibility: Ask whether you can make voluntary repayments, change the payment method or repay early, and whether any charges apply.
- Benefit and care effects: Borrowing can affect pension circumstances, aged-care affordability and the amount left in the estate. These outcomes depend on personal circumstances, so obtain individual advice.
- Impartial information: Services Australia’s Hank Jongen encourages people to contact its Financial Information Service for free, impartial information about these products and how they work.
This is general information for Australian readers, not a personal financial recommendation. Verify current rates, eligibility and contract terms before deciding.
Frequently Asked Questions
Will I have to make monthly repayments on a reverse mortgage?
Usually, a reverse mortgage does not require regular repayments in the same way as a standard home loan, but the balance continues to grow as interest and fees accrue. Check the contract for voluntary repayment options and circumstances that can trigger repayment.
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The product is designed to let the borrower remain in the home, subject to the loan’s conditions. Ask the lender how a permanent move, including a move into residential care, affects the loan and when repayment becomes due.
Does the Home Equity Access Scheme affect my Age Pension?
Eligibility and payment calculations are governed by Services Australia’s current rules, so a general comparison cannot determine the effect on an individual’s pension. Ask Services Australia or an independent adviser to assess your circumstances before applying.
What happens to the loan if I die?
The loan is generally repaid when the home is sold, often by the estate, which means less sale proceeds may remain for beneficiaries. The contract and any protections that apply determine the details; have the estate implications reviewed before signing.
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