How does a Reverse Mortgage affect your Age pension?

By Darren Moffatt

March 12, 2020


The impact a Reverse Mortgage may have upon your eligibility for the Aged Pension will depend on individual circumstances, and there are a number of important factors to consider. It ultimately depends on the purpose, and how you use the money from a Reverse Mortgage.  There are three ways you can take Reverse Mortgage funds:

1. Money taken as a lump sum

If the money is taken as a lump sum and spent on an asset that is assessable by Centrelink, such as a car, the value would count towards the asset test of the pension. This would also combine with your other assets (not including the value of your home) which could take you over a certain threshold and reduce your pension.

From 1 July 2018, the threshold where pensions begin to reduce is when your assets amount to more than the following.

Under Centrelink rules, if you draw a lump sum from a Reverse Mortgage, up to $40,000 is exempt from the assets test for up to 90 days, so the money needs to be spent within this time limit to avoid it becoming an assessable asset.

Any money drawn down is immediately subject to deeming by the Centrelink income test until you spend it. So for example, if you draw down $40,000, it will be deemed to be earning 1.75% (around $27 per fortnight). Single home owners can earn $172 per fortnight without affecting their pension, while for home owning couples, the amount is $304. If you purchase an asset that produces income, such as shares or an investment property, any derived income would be assessed as part of the income test.

Finally, if the Reverse Mortgage lump sum is spent on a non-assessable asset, such as home improvements or a holiday, then the amount would not be assessed under the income or assets test.

2. Money taken as an ‘income stream’

If the loan is taken as a regular income stream to spend on living expenses or non-assessable assets, then it would be unlikely to affect your pension. It is not counted as ‘income’ by the income test and, if spent quickly on bills and lifestyle, should have no effect on your age pension. But if the money builds up in your bank account, it is subject to the Assets Tests (see above).

3. Money in reserve (like a line of credit)

Funds that are available to you for the future, but which are not yet drawn down, are not assessed under either the income or assets tests for Centrelink purposes.

(NOTE: some lenders have in the past offered Reverse Mortgages with an ‘offset account’ attached. Funds within an offset account MAY be deemed an assessable asset. If unsure, please consult with Seniors First). 

The information in this fact sheet is for general information purposes only. It does not constitute Financial Advice, and should not be relied upon as such. While Seniors First used information published by Centrelink in developing this fact sheet, it is neither approved by Centrelink, nor attempting to speak on behalf of Centrelink. Rules and figures change, as do individual circumstances. Seniors First strongly encourages those seeking a Reverse Mortgage to speak to a Financial Information Services (FIS) officer at Centrelink directly about the effect (if any) a Reverse Mortgage may have on their pension entitlements.     

  • Hi,
    I am 88 and on a part centrelink pension, part super pension. I am thinking of getting a reverse mortgage of around $140,000 to give to my daughter to allow her to purchase property. Would this affect my centrelink pension?

  • Interested in a reverse mortgage of $500,000.00 on our residence value $1,500,000.00 to consolidate debts of $375,000.00 including Line of Credit mortgage of $300,000.00. Leaving $125,000.00 for renovations. Would this be an issue with a full pension if dispersed in 90 days?

  • Thanks for helping me understand that the asset assessed by Centrelink will cab used to count toward their test of the pension. I need to learn more about this and talk to experts to get their Centrelink advice now that I have to process things for my grandmother. Once I understand all of these, we can probably get the best aged care service for her without worrying about the expenses that much.

    • Hi Mia,
      Thank you for leaving a comment on our website.
      If you wish to discuss a reverse mortgage, please do not hesitate to contact us.
      Have a great day.
      Best Regards,
      Seniors First

    • Hi Garry,

      Thank you for leaving a comment on our website. We would need to have a better understanding of your situation, are you please able to call us on 1300 745 745 to discuss as soon as possible.

      Kind Regards,
      Seniors First

  • I don’t like the way you say contact us. People are asking questions and I am looking for answers to help my decision but these answers are no help So useless to ask I could ring if I wanted but would lik3 a bit of an idea first

    • Hi Vickie,

      Thank you for leaving a comment on our website.

      We do suggest you contact us to discuss your requirements, as cases do vary, and we do need to look at your circumstances to get a better understanding of your situation, to in turn give you answers you are looking for.

      Alternatively, if you would like for us to call you, we are more than happy to do so. If this is the case, please send your best contact number to our email address which is – As you have commented on a public forum we recommend you do not post your contact number here.

      We wish you a very happy new year.

      Kind Regards,
      Seniors First

  • Hi,
    I need to know the maximum amount an Aged Pensioner can take as a Reverse Mortgage for renovation to their home.
    My property is valued at approximately $1,500,000.00 & the renovations could be up to $300,000.00.
    Is there such a thing as a Government Reverse Mortgage?
    Thank you for your help.
    Kind Regards

    • Hi Ethel,

      Thank you for leaving a comment on our website.

      We will need a little more information from you to be able to advise on a figure, one of our team members will contact you today via email.

      The Home Equity Access Scheme (formerly known as the Pension Loan Scheme (PLS)) is a federal government reverse mortgage scheme.

      Kind Regards,
      Seniors First

  • we are pensioners and want to release S150,000 reverse mortgage to fund an extension on our house . will this affect out pension?

    • hi Sue,
      Thank you for leaving a comment.
      The short answer is maybe. It really does depend on your situation.
      We will email you today to find out a little bit more from you about your situation today.
      With Many thanks
      Kind Regards,
      Seniors First

  • Hi there I own my home and would like to take out a reverse mortgage as an income stream which I understand wouldn’t affect my pension therefore how much would I be able to borrow against the value of my home approximately $600,000. What would the process be please.

    • Hi Victoria,

      Thank you for leaving a comment on our website.

      Our team have emailed you today, as we do need some more information and clarity on your situation.

      We look forward to speaking with you soon.

      Kind Regards,
      Seniors First

  • My partner and I are in our mid 60s and own our house with a value of around 1 million.However we have very little income now and are living from dwindling investments. Would we be able to draw an income of around $4000 a month for two or 3 years with a RM and then pay this loan out with a future inheritance. Also would this affect a Jobseeker payment we are currently receiving.

    • Hi Steve,

      Thank you for your message.

      We would like to discuss your enquiry further, please call us on 1300 745 745.

      Kind Regards,
      Seniors First

  • If I have get a reverse mortgage for $20,000 and $80,000 ($100,000 total) in cash reserve will this affect my pension? Thanks

    • Hi Val,

      Thank you for your message.

      We would like to discuss your enquiry further, please call us on 1300 745 745.

      Kind Regards,
      Seniors First

  • What is the type of mortgage that allows you to live in your property after selling it to yourself because there is positive equity, and whether a bank offers such a facility?

  • Can I get a reverse mortgage if we own home but not the land we are in a retirement village and lease the land

    • Hi Kay,

      Thanks so much for your comment. I have contacted you via email, as we do need a few questions answered regarding your enquiry.

      We look forward to hearing from you.

      With Many thanks
      Seniors First

  • If my husband & I are on a pension. We have a unit valued about $1.4+mil but owe $200K. My husband is terminally ill & I am not well – I am 70, my husband 77. Medical bills are creeping up on us. I would like to reverse mortgage to at least pay off current mortgage ($200k) plus have at least $100k as a drawing max (would try not to use it).
    Would this affect my pension? – as still would not own my home as have reverse mortgage on it?

  • I would like to assist my mother to live in her own home for the rest of her life. Can I purchase the home from her at a discount and arrange for her care there? I want to prevent the Tasmanian Guardianship Board taking her property at some stage. Any info is appreciated

    • Hi Hanzi, purchasing her home at a discount might cause issues with her Age Pension as it could be seen by Centrelink as ‘gifting’. Do you have a power of attorney in place? If you are worried about the Guardianship Board intervening it seems there might be issues of mental capacity. This question touches on legal and financial issues so I recommend you consult a Centrelink FIS office, a lawyer and possibly a financial adviser before implementing any decisions. Regards, Team SF

  • Because of the pandemic, I get the pause from my lender, 6 months has passed and now still my conditions did not change, we are pensioners, my self since a week ago, I do owed my mortgage around 490K but my house has an equity of 500K, my wife an I we want to downsize, but at this moment we can afford the monthly payments, how can get a help or what can I do to ease my situation until I sold my property.

  • if 100% of a reverse mortgage on the family home is applied to fund an aged care residence bond is that amount counted as an asset?

    • Hi mark, this is a financial advice question. You will need to consult with a financial adviser or the Centrelink FIS officer. Sorry we can’t help here. Team SF

  • Hi I am thinking about a reverse mortgage I am 80 get full pension, small super pension account Own my own townhouse I am finding it difficult to live off pension. Can I have more information a.g. interest rate etc

  • Q. If I was approved for a RM and an amount was say 100,000.00, can this amount amount be drawn down over a number of years as a supplement to living expenses, e.g. say $10,000 a year and not be deemed as taxable asset on the whole amount approved initially.

    • Hi Richard, thanks for your question. YES – some reverse mortgage lenders have what is called an ‘instalment plan’ or ‘regular advance’ feature where you can choose to have an amount automatically drawn down monthly, quarterly, or yearly and deposited into your nominated bank account. Although the funds feel like ‘income’ they are in fact small portions of your home equity. Therefore these payments are not assessable under the Age Pension income test, but they are assessable under the assets test. However, if you are spending/consuming this money on living expenses within 90 days it will not be deemed an ‘asset’, and will not affect your pension.

      The other benefit of drawing funds gradually in this way is the significant saving in mortgage interest over time, compared with drawing a lump sum. We recommend all borrowers consider drawing some of the funds gradually where ever possible. For more info on this, feel free top contact our office. DM

    • Hi there, it depends on your age. The reverse mortgage lenders allow you to release more equity, the older you get. I will arrange for one of our broker team to contact with more info. Regards, DM

  • Hi,
    My husband and I applied for a reverse mortgage a few years ago but it was not approved because the land that the house is on is zoned commercial. I am making inquiries now to see if there have been any changes to the rules in the last few years that would allow us to apply again.

    The house on the land is our primary ( only ) residence.
    The valuer general has assessed the property as residential. The reason given is that the best and highest value use for this block is residential. It is not suitable for commercial use.
    The land rates are charged at the residential rate.
    For the DA approval to build the dwelling, we had to show it was a business. so we use one room in the house as a BnB.
    The house/land is located at the end of a no through road and is surrounded by residential dwellings.
    The land was part of a larger block which we subdivided. The original block faced the main street and was zoned commercial. We needed to do this to clear debts arising from the GFC. Because the original block was zoned commercial the newly created block was automatically zoned commercial. We, and the council looked at every possible option to rezone the block as residential. All the options were either too expensive or would take far too long and there was no real benefit to be gained by going down that path. The one exception being that we could not get access to a reverse mortgage.
    We have a first mortgage on the house for $50,000 provided by our solicitor. The house would now be worth over $500,000. My husband is 89 this year and we would like to clear the debt on the house.
    Would you kindly let me know if it is likely that an application would be successful.

    Kind regards
    Tania B

    • Hi Tania, regrettably I still don’t think your property will be eligible. Reverse mortgage lenders do not take properties zoned as commercial. In addition, they generally do not accept properties that have been adapted, or are being used, as a ‘BnB’. These lenders want conventional residential properties as security because the resale markets are more established and the valuations more resilient in downturns. Sorry we can’t help.

  • Thanks Darren
    The reason I was making an enquiry for RM products available is if we decide to downsize.
    We have a current RM with Bankwest, $135,000 which we just draw down on as required, your item 3 ]. We have a balance of $11,500- Which we have to settle upon sale However if we move we will loose this facility and BW will not transfer to another property and of course the product has been withdrawn by them.
    We are not quite ready for such a move at the moment but we are thinking medium term plans for the future. We are both retired , we get full Centrelink pensions as well as Annuity Pensions with First Choice. Is there any way we could test the water and pre qualify before we jump from the frying pan in to the fat, so to speak. Kind Regards

    • Hi Keith, there is no fast answer here. It is not possible to get an advanced ‘approval in principle’ for a Reverse Mortgage, as approval is heavily contingent on the security property and valuation. Having said that, as long as the new home is a standard residential property in a metro area, or approved regional centre, then it is possible to part-fund the purchase with through a reverse mortgage, along with your sale proceeds from the current home (subject to loan approval). This means of course you would need to sell the existing home first. Before you take any decision, please call our office so we can give you more detail. And note the information in this comment is accurate as of today’s date, but lender policies regularly change, so you should always check first. Regards, DM

  • Hi I am interested in taking out a reverse mortgage on a house that I own outright in my personal name in southern highlands. If I took out say 200,000 what would be the interest and pay back terms please?

    • Hi Caerine, the amount you can release via reverse mortgage loan depends on a) your age and b) your home value. If for example you were 70 and the house was worth $800,000, then you could feasibly be approved for a reverse mortgage loan of $200,000. I will have one of our brokers contact you tomorrow with more info. Best regards, DM

  • I’ve retired. I put all my super into income account and draw from it for living and mortgage repayments. My husband is still working but is a low income worker. With the stock market crashing due to the COV 19 MY super won’t be enough to pay off the mortgage. Is it better for me to pay off the mortgage with remaining super funds. I have an off set bank account paying interest only.

    • Hi Margaret, thanks for your comment. What you’re asking is a financial advice question, which we are not licensed to provide (we are credit advisers). The CoronaVirus is playing havoc with retiree share portfolios and super accounts right now – it is a big problem. I would suggest you contact your super fund or financial adviser to get some advice on this. What I can tell you is that you may be eligible to refinance the current mortgage with a reverse mortgage. So if you get stuck with a small debt still on the house after you both stop working it is possible to pay that out so that you don’t need to make regular monthly repayments any more, thereby easing your cash-flow in retirement. Feel free to call our office to chat about this. I wish you and your husband all the best in these challenging times. Regards, DM

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