Home Loans: reverse mortgages gaining popularity in Australia

Designed to free up funds in retirement, the reverse mortgage is becoming a popular option for retirees who need finance medical expenses and want to enjoy their golden years by using equity to fund their lifestyles or even assist their children financially.

In 2005, over 13,000 Australians took the reverse mortgage option to fund their retirement, loaning a grand total of AUD 647 million—a whopping increase over the previous year's 5,000 reverse mortgage applications, totalling just AUD 250 million.

Current estimates of the figures show that up to AUD 1.1 billion worth of reverse mortgages were loaned to older Australians, and by 2010, the value of Australian reverse mortgages could reach a staggering AUD 3 billion with a total value of all active reverse mortgages reaching over AUD 12 billion.

The idea of an inheritance, leaving the family home to children or grandchildren, is declining as retirees realise the financial potential in their homes and opt to live it up through funds generated by a reverse mortgage. The present-day baby boomers are looking to supplement their existing income, finance luxury items or fund interstate and international travel.