Taking out a reverse mortgage may impact your eligibility for a pension or other benefit entitlements, depending on how the funds are accessed and used.
For example, if you elect to take your loan, or part thereof, as a regular income payment but save that income rather than spending it, those savings may count towards the ‘income test’ (and assets test) for pension eligibility. This could affect how much pension you receive.
Because every situation is different, the impact on your pension may depend on:
- How you receive the funds (lump sum, regular payments or a combination)
- Whether the money is spent or retained as savings
- Your overall financial position and existing assets
We recommend that you speak with Centrelink or the relevant government agencies before taking out a reverse mortgage.
We also recommend that you speak with an independent financial advisor, who can help you understand the potential impact of the loan on your financial situation, now and over the longer term.
How does a reverse mortgage affect my pension?
A reverse mortgage may not automatically affect your pension, but the way you use the funds can make a difference.
Generally:
- Money drawn from a reverse mortgage and spent on living expenses, home improvements or medical costs is not usually assessed.
- Money that is saved or invested may be counted under Centrelink’s income and assets tests.
Because Centrelink assessments can change over time, it’s important to get up-to-date advice based on your circumstances.
Does a reverse mortgage count as income for Centrelink?
A reverse mortgage itself is generally not considered income. However, any funds you draw down and keep as savings may be assessed under Centrelink’s income and assets tests.
Will a lump sum reverse mortgage affect my pension?
A lump sum may affect your pension if it remains unspent and is counted as an assessable asset. If the funds are used, they are generally not included in the assessment.
Do I need financial advice before taking out a reverse mortgage?
We strongly recommend seeking independent financial advice from an advisor who can help you understand how a reverse mortgage may affect your pension, cash flow and long-term financial plans. We have a Home Equity Release Calculator to estimate how much equity you may be able to access. Speak with the team for more information and you can apply online when you’re ready.