A reverse mortgage allows you to borrow against the value of your home without the need to ever make repayments into the loan.  The lender charges interest on the borrowings and this interest accrues.  When the home owner eventually sells the property or passes away, the amount of interest that has accrued is deducted by the lender from the estate.

It has been said that reverse mortgages are going to be very popular among baby boomer retirees.  Research conducted by the Association of Super Funds Australia expects that more than half of all seniors will be disappointed at not having sufficient superannuation for retirement.  A reverse mortgage allows retirees with an easy way to top up their lifestyle throughout retirement.

There are 2 common methods of borrowing with a reverse mortgage.  You can borrow a lump sum or you can have funds periodically paid into a bank account of your choice.  This essentially allows you to tap into the equity built up in your home and use it as a retirement income.

With Australian reverse mortgage borrowing already above $500 million annually and demand expected to skyrocket a not for profit organisation called SEQUAL (Senior Australians Equity Release Association of Lenders) has stepped in to control the quality of reverse mortgages on offer.  SEQUAL demands that its members adhere to certain quality standards and maintain a set code of conduct.  Part of the code involves offering safety features that can be built into the reverse mortgage.  These range from fixed interest rates to equity guarantees.  An equity guarantee locks in a portion of your properties future value.  This ensures that you can never eat into all the equity of your property. 

To many Australians faced with retirement that do not like the idea of selling their home to afford retirement, a reverse mortgage may be the answer.