Reverse Mortgages are one of the fastest growing sectors of the Australian Home Loan Market. They are a fairly new financial product designed to assist people over 60 to access the equity in their home for any purpose they desire. Reverse Mortgages do not need to be repaid by the applicant.

Home Equity Loans, Also known as Lines Of Credit Loans have been around for a while and are reasonably well known by most Australians. These Financial products also allow applicants to access the equity in their home for any one of a number of purposes. Home Equity Loans do have to be repaid over time. They also attract monthly interest repayments.

So what is better – a Reverse Mortgage or an Equity Loan?

For most Australians their house is their greatest asset. But bricks and mortar can not be used to cover everyday living expenses and can't provide those extra funds needed for life's little luxuries.
Here are some points for consideration:

Advantages of a Reverse Mortgage

• The loan does not need to be repaid during the lifetime of the applicant;
• The applicant does not have to qualify for the loan using their existing income;

Disadvantages of a Reverse Mortgage

• You may not have enough money left to fund moving into a retirement village.
• The value of your estate may be much less than anticipated because the debt increases over time.
• If you take the loan as a lump sum it may have an impact on your eligibility for a pension.
   
• If you live with a partner or spouse and you're joint owners of the house, the reverse mortgage would be in both names so your home is protected as long as one of you lives there. If only one of you owns the house, the loan will only be in one name so it will have to be repaid when the partner who owns the house dies or moves into residential aged care.
   
• You will probably not be able to borrow as much using a Reverse Mortgage as an Equity Loan
• Reverse Mortgages are more expensive than Equity Loans

Advantages of a Home Equity Loan

• These loans offer more flexibility.
• You are able to obtain this loan, make interest only repayments and then revalue and gain access to more funds;
• The loan is cheaper than a Reverse Mortgage;
• Can borrow up to 65% without documents;
• No Age restrictions as with Reverse Mortgages

Disadvantages of a Home Equity Loan

• At least the monthly interest repayments need to be maintained as long as the loan is in place

In the end - the choice between a Reverse Mortgage and an Equity Loan comes down to what facility the applicant feels most comfortable with.