Reverse Mortgages and the Cost of Waiting Until Retirement Becomes Stressful

Every year of waiting has a cost. For clients in their 60s and 70s, that cost isn't always obvious at first. It shows up as a hot water system left unrepaired, a holiday quietly cancelled or a grandchild's school fees covered from savings that were meant to last decades.

It's not just anecdotal. Recent research from CoreData and Conexus Financial found that 31% of retirees with savings are holding back from drawing down more of them, largely out of concern for the emergence of unexpected expenses or future health or care needs. Among those retirees who stick to the legislated minimum withdrawal of 4%, 29% spend less than 40% of what they draw down.

We’re seeing this in current lending. Average loan sizes have decreased, an indication that broker clients are borrowing exactly what they need, rather than what they might want to live more comfortably. This is where brokers can help: a reverse mortgage lets clients borrow enough to live more comfortably, not just get by.

Many Australians spend decades building wealth, then find it hard to make the shift into spending it, even when that wealth could ease pressure now. Meanwhile, the value sitting in their family home quietly grows, locked up and inaccessible. Or is it?

A reverse mortgage is one way to unlock that value without clients having to sell their home and move away from their community. While it may not be the right option for everyone, it shouldn't be treated as a last resort either. Using the wealth in the family home to fund retirement today can mean a more comfortable lifestyle, repairs made when they’re needed, less financial stress for clients. It can provide contingency funds, to be drawn as needed, so clients can feel confident using their super to fund everyday living.

Many retirees who could benefit from a reverse mortgage don't take one out. The reasons are not always financial; they're emotional and understandable.

Some worry about what their family will think, particularly adult children who see the home as part of their inheritance. Others associate reverse mortgages with the products sold decades ago, before regulations tightened and strong consumer protections were introduced with the National Consumer Credit Protection Act 2009. Some people simply don't want to think about it yet, preferring to manage on a tighter budget than start a conversation about the possibilities that unlocking home equity could open.

None of these behaviours are unreasonable. But waiting has a cost too, and it's one that's easy to underestimate because it generally builds slowly.

Consider the client who puts off home maintenance for five years and who faces a larger repair bill than if the work had been done early. That small hole in the roof that becomes bigger and results in major damage following a storm. The dental treatment that’s skipped because the budget is tight but results in major dental work down the track, becoming a bigger health cost both financially and physically. Others draw down savings meant to last twenty years, watching the balance shrink faster than planned, all while equity in the home sits untouched.

There's also a quieter cost for clients. Retirement is meant to bring more freedom, not less. Homeowners who spend it managing scarcity rather than enjoying the years they've worked for are paying a cost you don’t see on a bank statement. It’s the emotional cost of saying no – no to enjoying that lunch with friends, no to pursuing that hobby or interest, no to spending time with loved ones.

Financial stress in retirement isn't a fringe issue. Research from National Seniors Australia, based on a 2023 survey of almost 6,000 Australians aged 50 and above, found 80% of respondents felt the increasing cost of living had impacted their lifestyle, with 83% expecting that impact to continue over the following 12 months. The expenses causing the most concern were health, energy and groceries, the everyday essentials rather than discretionary spending. Although this research was undertaken three years ago, the cost of living has only increased since then and the findings are likely just as relevant to today.

National Seniors found that the worry doesn't stop at the weekly budget. Just over half of respondents thought it likely they would outlive their savings and investments, and of those, 86% said they were worried about it. That concern compounds over time.

This kind of ongoing pressure has a measurable effect on health. Data from the Australian Institute of Health and Welfare, drawing on the long-running HILDA Survey*, found that by 2023, nearly 55% of financially stressed Australians reported high or very high levels of psychological distress, roughly 2.6 times the rate of those not under financial stress.

Faced with this pressure, most retirees respond the same way: they cut back. Cutting back on spending was the main strategy respondents used to manage rising living costs, and this held true even among the wealthiest group surveyed, with 59% of those holding $750,000 or more in savings saying it was a strategy they relied on. Scaling back might ease pressure in the short term, but it's a strategy with limits. Retirement can stretch across two or three decades, and a lifestyle built around constant scarcity isn't a sustainable – or enjoyable – way to spend them.

What retirees say they actually want is straightforward: 91% rated having a regular income that covers essential needs as very important and 86% said the same about being able to afford care and medical costs. These aren't ambitious goals. They're the basics: enough income to cover the fortnightly bills and the confidence that health and care costs won't be a financial crisis when they arrive.

Financial stress in retirement rarely comes from one big problem. It builds from a series of smaller pressures: a winter power bill that's higher than expected, a car repair that can't wait, a medical appointment with a specialist that’s barely covered by Medicare.

Taking a lump sum from super today to fund these expenses can impact your clients’ future income. A reverse mortgage gives homeowners a way to ease financial pressures using an asset they already have.

Using a reverse mortgage, clients can draw a lump sum for a specific project, or set aside an amount for future needs and draw on it as required. They can also set up a regular income stream. Because our loans are flexible, your clients can do all three! This strategy preserves your clients’ super and its ability to keep providing retirement income into the future.

Drawing a regular income stream to top up super and the Age Pension

Many retirees find their super balance and Age Pension payments don't quite stretch to cover day-to-day living, particularly as the cost of living continues to rise. A reverse mortgage can provide a regular fortnightly or monthly income stream to top up other income sources. This can boost clients’ monthly budget and reduce the pressure to draw down super faster than planned.

Paying off a mortgage or other debt in retirement

Not everyone enters retirement debt free. Homeowners still paying a home loan, or managing credit card or personal loan debt, often find those repayments compete directly with everyday living costs. Having to meet that expense, month in, month out, can take its toll.

A reverse mortgage can be used to clear existing debt, removing the monthly repayment obligation and freeing up cash flow for the years ahead. About 40% of broker clients use their home equity to refinance a home loan and a similar proportion use some of their home equity to discharge other forms of debt. This eradicates the obligation to meet regular monthly repayments.

Fixing or renovating the home

Homes often need work: a new roof, an updated kitchen or modifications that make the home safer and easier to live in long term. Deferring this kind of maintenance usually makes it more expensive later, and can affect both comfort and safety in the meantime. Using home equity to fund the work means it can be done when it's needed, not just when savings allow.

Replacing an ageing car

A safe and reliable car is important for independent living. Replacing an ageing vehicle is a significant cost that many retirees put off simply because it generally can’t be covered by regular income. As well as being a potential safety issue, an ageing car is often an expensive car to run as parts wear out and systems wear down.

A reverse mortgage can cover the cost of a newer vehicle in a single lump sum, avoiding the need for a car loan and its ongoing repayments – assuming a bank is willing to provide finance. This means the cost comes from the client’s home equity, not from savings earmarked for everyday living or from a facility that adds a separate monthly repayment to the budget.

Paying for medical or dental treatment

Health costs tend to rise with age, and not all of them are covered 100% by Medicare or private health insurance. Dental work, specialist consultations and other out-of-pocket treatments can add up quickly. Some retirees delay or skip treatment altogether because of cost, which often leads to larger health and financial costs down the track.

A reverse mortgage can cover these expenses when they arise, rather than forcing a choice between health and savings. Having a contingency sum set aside to meet future needs can be drawn on as required. An added benefit to this approach is that interest is only applied on drawn funds.

As needs change, so does the type of support required, whether that's in-home support services or a move into residential aged care. The cost of quality care can be significant, and decisions are sometimes made based on what's affordable rather than what's genuinely the best fit. Home equity can help fund the level of care that suits the person, not just the budget.

Waiting rarely feels like a decision. It feels like caution and, for many retired Australians, it feels like the responsible choice. But as this article highlights, the cost of waiting is real. It shows up in cutbacks that chip away at daily life, in worry about outliving savings and in the documented toll that ongoing financial stress takes on both mental and physical health.

At the same time, most homeowners over 60 are sitting on substantial equity that plays no part in easing that pressure. It doesn't help fill the petrol tank or pantry, cover your energy bills or pay the rates, no matter how much the home is worth. A reverse mortgage is one way to close that gap, turning equity that's otherwise locked away into money that can genuinely be used.

None of this means a reverse mortgage is the right choice for everyone. It's a decision that deserves proper information, independent legal advice and a clear look at what it will mean for your clients’ finances and family over the years ahead. What it shouldn't be is a decision put off simply because it feels safer to wait. For many homeowners, the safer choice is understanding the option properly now, before financial pressure forces clients to make decisions in less favourable circumstances.

*Australian Institute of Health and Welfare (2025) Financial stress and mental health, drawing on the Household, Income and Labour Dynamics in Australia (HILDA) Survey.

Applications for credit are subject to eligibility and lending criteria. Fees and charges are payable, and terms and conditions apply (available upon request). Household Capital Pty Limited ACN 618 068 214, Australian Credit Licence 545906, is the Servicer for the credit provider Household Capital Services Pty Limited ACN 625 860 764.