Home reversion schemes
Selling a piece of your home
In a home reversion scheme you sell a proportion of the equity
in your home while you still live there. In contrast, a reverse
mortgage is actually a loan.
Before you take up a home reversion scheme you should think
carefully about how the scheme will affect your current and future
finances and how it will impact your retirement
How home reversion schemes
You receive a reduced or 'discounted' lump sum payment in
exchange for a fixed proportion of the future value of your
Because you can only sell a fixed proportion of the future value
of your home (for example, up to 65%), the remaining home equity is
Imagine your home is valued at $200,000 and you sell 50% of the
future value of your home. Although 50% of the current value of
your home equates to $100,000, you will only receive a discounted
sum that might range from $35,000-$65,000, depending on your
You don't have to make repayments on the money you receive while
you live in your home. When your house is sold, you have to give a
portion of the proceeds to the scheme provider. So, if 20 years
down the track your house sells for $400,000, the provider would
get 50% of this amount: $200,000.
There is currently only one home reversion scheme provider in
Australia. Home reversion schemes are only available if you live in
certain areas of Sydney or Melbourne.
- Home reversion schemes can be difficult to understand
- You don't know what the actual cost is
- Your circumstances and financial views might change as you age;
if you use too much money now, you may find you do not have enough
- Your pension eligibility may be affected by the lump sum you
receive and how you use it
How much money can you
There is usually a minimum amount you can access, for example,
How much will it cost?
It is difficult to work out how much a home reversion scheme
will cost you in the end. The scheme reduces or 'discounts' the
money you receive upfront (for example, 35%-60% of the present
value of the part of your property that you sell). So if your home
is valued at $200,000 and you sell 50% of the future value of your
home, you may receive about $35,000-$65,000, depending on your
The amount of this discount depends on many factors, including
your age and life expectancy.
You also give up the share of the future value of your home you
sell to the provider. The more your property grows in value, the
more you will end up paying.
Questions to ask the
Before you sign on the dotted line, check the following.
Special terms and conditions
Ask if there are any special terms and conditions that restrict
what you can do with the money. Find out what happens if you sell
your home early or if you sell it for much more than they
Check if you need the provider's permission to sell, lease,
vacate or renovate your home or have someone move in with you.
If things go wrong
Ask the provider if they belong to an external dispute
resolution scheme, such as the Financial Ombudsman Service. Then
you will know where to go if you have a problem with the scheme.
See how to
complain for more information on how to resolve disputes.
Do your own research
Check the following before you sign up for a home reversion
Talk to the Department of Human Services' Financial Information
Service on how a home reversion scheme might affect your
Arrange an independent valuation of your home. If the provider's
valuation is too conservative, you will give away thousands of
dollars of home equity.
Independent legal advice
Ask your legal adviser to explain the contract so you understand
the consequences of breaching any terms and conditions.
Home reversion schemes should not be entered
into lightly. Consider your future needs, speak to your family and
obtain financial and legal advice before proceeding.
Last updated: 24 Aug 2015