What is a Reverse Mortgage?
A reverse mortgage is a type of loan designed for older homeowners who want to access money using the equity in their home. The loan is secured against the property, and no regular repayments are required. Instead, the interest is added to the loan balance over time—a process known as capitalised interest.
Because lenders do not receive repayments, reverse mortgage interest rates are typically higher than standard home loans. While a traditional mortgage might charge 5% interest, reverse mortgage rates can reach 9%, 10%, or even 11%, depending on the lender, property type, and amount borrowed.
Understanding Capitalised Interest
When interest capitalises, it is added to the total loan balance. This means you pay interest on the original loan plus interest on the interest itself—often referred to as “paying interest on interest.”
Here’s an example:
- Year 1: You borrow $200,000 + $5,000 fees at 10% interest → Owe $225,500
- Year 2: Interest is charged on the new balance → Owe $248,050
- Year 3: More interest is added again → Owe $272,855
As shown above, the debt can increase quickly. The longer the loan continues, the more equity it consumes. This can reduce what’s left in the home over time and may eventually require the homeowner to sell the property.
Why do Major Banks no Longer Offer Reverse Mortgages?
In Australia, major banks such as Commonwealth Bank, ANZ, Westpac, and NAB have exited the reverse mortgage market. There has been growing concern about retirees losing their home equity or being left without housing security after the loan period ends.
As a result, those seeking a reverse mortgage are now turning to private or non-bank lenders. Many people are cautious about working with these institutions due to perceived risk or lack of transparency. As a result, those seeking a reverse mortgage are now turning to private or non-bank lenders. Many people are cautious about working with these institutions due to perceived risk or lack of transparency.
Retirement Funding Without Debt or Interest
For retirees who want to access funds during retirement without taking on a loan, there is another approach. RealFuture offers an alternative that does not involve monthly repayments, compound interest, or traditional lending.
RealFuture: A Way to Unlock Equity, Without a Loan
RealFuture is an online property marketplace offering an alternative way for homeowners—particularly retirees—to access funds from their home without taking out a traditional loan or reverse mortgage.
Instead of borrowing money, RealFuture enables you to sell your home with an extended settlement period of 12 to 36 months. During this time, you can stay in your property and receive a portion of the agreed sale price upfront.
Key features of the RealFuture model include:
✅ Access a portion of your home’s value upfront
✅ No interest charges
✅ No monthly repayments
✅ No traditional debt
✅ Stay in your home during the settlement period
This arrangement provides homeowners with flexibility and time to plan their next steps, while still unlocking value from their home. The final sale price is adjusted at settlement based on market performance, meaning both the seller and buyer share in any future change in value.
RealFuture’s approach offers a structured alternative for retirees who want to enhance their lifestyle, manage costs, or support their family – without the risks associated with compound interest or private loans.
Is a Reverse Mortgage Right for me?
If you’re exploring ways to fund retirement without the complications of a reverse mortgage, RealFuture may align with your needs. Whether you’re seeking extra funds for lifestyle, medical expenses, or family support, RealFuture provides an option worth considering.
Learn more about how RealFuture works and explore an alternative way to stay in your home while accessing your equity.
