As retirement approaches, many older Australians face the same question: “Should I stay in my home and access equity with a Reverse Mortgage, or downsize and move into a retirement village or lifestyle community?”
It’s a big decision, one that impacts not just your finances but also your lifestyle, independence, and future choices.
Adding to the complexity is a little-known fact: retirement villages and lifestyle communities are not eligible for Reverse Mortgage loans. Once you sell your home and move into one, you lose the option to access home equity through a Reverse Mortgage if you later need extra funds.
So how do you decide which path is best? Let’s break down the key differences and considerations.
[ ALSO READ: ‘I Love My Home’: Why over 55’s are reluctant downsizers ]
What Is a Reverse Mortgage?
A Reverse Mortgage lets homeowners aged 60+ unlock the equity in their property without selling. You receive funds as a lump sum, regular payments, or a line of credit while continuing to own and live in your home.
Key features:
✅ No regular repayments required (loan repaid when you sell, move out, or pass away)
✅ Flexible use of funds — home renovations, medical expenses, supplementing income
✅ You retain full ownership of your home
What Are Retirement Villages and Lifestyle Communities?
Retirement villages and lifestyle communities are designed for seniors seeking a low-maintenance lifestyle with access to shared amenities and social activities.
Residents typically downsize by selling their existing home and purchasing the right to occupy a unit or villa in the village.
But there are important financial considerations:
- Entry costs can range from $200,000 to $1 million+, depending on location.
- Ongoing fees for maintenance and services (often $300–$1,000+ per month).
- Exit fees, known as deferred management fees (DMF), can take a significant chunk of your home’s value (commonly 20–35% after 5–10 years).
Reverse Mortgage vs Retirement Villages: A Side-by-Side Comparison
| Feature | Reverse Mortgage | Retirement Village |
| Ownership | You keep full ownership of your home | You don’t own the property; you purchase a right to occupy (leasehold/license) |
| Eligibility for Reverse Mortgage | Eligible as long as you own your home | Not eligible – Reverse Mortgages cannot be taken on retirement village units |
| Access to Funds | Flexible access to equity as needed | Must sell your home to buy in; no access to future equity if needed |
| Upfront Costs | No upfront cost other than loan setup fees | Large entry fee (buy-in price) |
| Ongoing Costs | Interest accrues on loan balance | Monthly maintenance/service fees |
| Exit Costs | Loan repaid when you sell or pass away | High exit fees (deferred management fees) |
| Flexibility | Stay in your home as long as you like | Must follow village rules; leaving can be costly and complicated |
| Lifestyle Changes | Minimal – you remain in your home | Downsizing and moving to a new community |
Why Reverse Mortgage Is NOT Available on Retirement Village Units
Here’s a crucial detail many don’t realise until it’s too late: retirement village units are not eligible for Reverse Mortgage loans.
This is because in most Australian villages, residents don’t hold freehold title to their property. Instead, they enter into leasehold or license agreements. Lenders require freehold ownership as security for a Reverse Mortgage, so once you move into a village, you lose the ability to access equity in the future if unexpected expenses arise.
[ ALSO READ: Over 55’s Lifestyle Villages: Financial Pros & Cons of Land Lease homes ]
Key Questions to Ask Before Deciding
✅ Do you love your current home and neighbourhood?
If so, a Reverse Mortgage could allow you to stay put while improving cash flow.
✅ Are you prepared for the financial trade-offs of a retirement village?
Understand all entry, ongoing, and exit costs before committing.
✅ Do you value independence, or community living?
Reverse Mortgages maintain your independence; villages offer a more structured environment.
✅ What about future flexibility?
Remember, once in a village, you can’t access a Reverse Mortgage later.
Why More Over 55’s Are Choosing Reverse Mortgages
As of March 2025, according to Banking Day the Reverse Mortgage sector in Australia has expanded significantly, with a total loan book of approximately $3.98 billion, reflecting a 90% increase compared to March 2024.
And it’s no wonder, because for many Australians, staying in the family home provides comfort, stability, and continuity. A Reverse Mortgage can:
- Help you “age in place” safely by funding home modifications.
- Supplement your retirement income without needing to downsize.
- Give you peace of mind knowing you have access to funds for unexpected needs.
Seniors First: Helping You Explore Your Options
At Seniors First, we’ve helped over 5,500 Australians aged 60+ make informed decisions about their retirement finances. As Australia’s leading Reverse Mortgage broker specialist, we can explain your options clearly and help you decide if staying in your home with a Reverse Mortgage is right for you.
Talk to a Reverse Mortgage Broker Today
Before making a life-changing decision about downsizing or taking out a home equity loan, get expert advice.
📞 Call 1300 745 745 or visit seniorsfirst.com.au for a free, no-obligation chat with one of our friendly specialists.