Asset-rich, cash-poor? The four ways to unlock your home's equity in retirement, compared

It's one of the most common situations in Australian retirement, and one of the most frustrating: you're sitting on a home worth a great deal of money, but your actual income is tight and your super is modest. On paper you're comfortable; in your bank account, less so. Your biggest asset is locked up in bricks and mortar, and it can't buy the groceries. The good news is that there's more than one way to unlock some of that wealth — and most people don't realise how different the options are, or that three of the four even let you stay in your home. This article is general information only, not personal advice.

What are the four options?

The first path is downsizing: you sell the home and buy something smaller or cheaper, freeing up the difference as cash. It releases a lump sum, cuts your running costs, and if you're eligible you and a spouse can each add up to $300,000 of the proceeds to super as a downsizer contribution — though together you can't contribute more than the sale raised (ASIC MoneySmart, https://moneysmart.gov.au/grow-your-super/downsizer-super-contributions). The trade-offs are real: the one-off costs of selling and moving (agent fees, stamp duty on the new place, removalists, and, if you buy an apartment, strata levies), the emotional wrench of leaving, the fact that you have to move, and a means-test catch — the freed-up cash becomes an assessable asset for the Age Pension, where your home was exempt (our companion pieces on downsizing costs, the downsizer contribution, and the home-sale-proceeds exemption cover the detail).

The second is a commercial reverse mortgage: you borrow against your home with no repayments and stay put, with the interest added to the loan and the whole thing repaid when you die, sell, or move into aged care. MoneySmart notes that at 60 you can typically borrow only 15–20% of the home's value, rising to about 20–25% at 65, that the interest rate is usually higher than a standard home loan, and that loans taken since 18 September 2012 carry a no-negative-equity guarantee, so you can never owe more than the home is worth (ASIC MoneySmart, https://moneysmart.gov.au/retirement-income-sources/reverse-mortgage-and-home-equity-release). The debt compounds and eats into what's left for your family, and it's the dearer of the borrowing options — but it reduces the inheritance rather than leaving your children a debt (see our pieces on reverse mortgages and on what your heirs actually inherit).

The third, and often the quiet achiever, is the government's Home Equity Access Scheme (HEAS). It's effectively a government-run reverse mortgage: you draw a fortnightly income, or lump-sum advances, or a combination, against your home, and the same no-negative-equity guarantee applies (Services Australia, https://www.servicesaustralia.gov.au/home-equity-access-scheme). Its great strength is the price — the interest rate is 3.95% a year, compounding each fortnight (as at July 2026), which is well below typical commercial reverse-mortgage rates (Services Australia, https://www.servicesaustralia.gov.au/interest-rate-for-loans-under-home-equity-access-scheme). Its limits are that there are caps on how much you can draw, and it's still a compounding debt (our companion piece on the Home Equity Access Scheme goes deeper).

The fourth is home reversion, where you sell a fixed share of your home now for a discounted lump sum and keep living there; when the home is eventually sold, the provider takes that share of the proceeds. The attraction is that there's no debt and no interest — you've sold a slice, not borrowed. The catch is that you sell that slice at a discount to its real value, so you and your estate ultimately get less, and there are few providers offering it (see our piece on home reversion schemes).

How should you choose — what questions decide it?

With four quite different paths, the way to narrow the field is to ask a few plain questions. The biggest is whether you want to stay or are happy to move: if you'd happily move somewhere smaller, downsizing is on the table; if you want to stay in the home you love, you're looking at a reverse mortgage, the Home Equity Access Scheme, or home reversion, all of which let you stay. The next is whether you need a lump sum or a regular income: if it's steady income you're short of, the Home Equity Access Scheme is beautifully suited, since it's designed to pay a fortnightly amount, whereas downsizing or a reverse mortgage is better for a one-off lump sum.

Then there's how much leaving the home to your family matters. All four reduce what's left for your estate, but downsizing and home reversion crystallise that reduction now, while a reverse mortgage and the Home Equity Access Scheme erode it gradually as the debt compounds — so if leaving the maximum possible is a priority, that shapes the choice. Finally, how cost-sensitive are you: as a rule of thumb the Home Equity Access Scheme is the cheapest way to borrow against your home, downsizing carries significant one-off costs, and a commercial reverse mortgage is generally the most expensive.

Don't forget the Age Pension effects

One thing to weigh across all of these is the means test, and it's genuinely fiddly. Your home is exempt, but the moment you free up cash by downsizing, that cash becomes an assessable asset and can reduce your pension — sometimes enough to offset a chunk of the benefit. The Home Equity Access Scheme is handled with some care here: the ongoing fortnightly loan payments are not treated as income, and the home securing the loan stays an exempt asset — but a lump-sum advance you draw and hold is recorded by Services Australia as a financial investment and is then deemed under the income test, so how you take the money matters (Services Australia, https://www.servicesaustralia.gov.au/home-equity-access-scheme). The same logic applies to money you borrow commercially and hold without spending — it can become assessable. These interactions can change which option comes out ahead, so they're worth working through carefully.

What do the worked examples show?

These show the two clearest cases — someone who wants income and to stay, and a couple happy to move for a lump sum. They are illustrative only, not personal advice, and the figures change over time.

Norma, 74, is a single homeowner on a full Age Pension whose house is worth around $900,000 but whose income barely covers the bills; she has no wish to leave. On these facts a stay-in-place, income-focused option fits: the Home Equity Access Scheme can pay her a modest fortnightly top-up at 3.95% a year (as at July 2026), the cheapest way to borrow against the home, with a no-negative-equity guarantee and — importantly for her — those fortnightly payments not counted as income against her pension (Services Australia, https://www.servicesaustralia.gov.au/home-equity-access-scheme). On these facts it is generally rational for Norma to look first at the HEAS rather than a dearer commercial reverse mortgage, while understanding the balance is a compounding debt that reduces what her estate eventually keeps.

Greg and Susan, both 68 and part-pensioners, live in a large four-bedroom home they find costly to run and are quite willing to move somewhere smaller. On these facts downsizing does two jobs: it frees a lump sum and cuts their running costs, and if they're eligible each can add up to $300,000 of the proceeds to super as a downsizer contribution (ASIC MoneySmart, https://moneysmart.gov.au/grow-your-super/downsizer-super-contributions). On these facts it is generally rational for them to weigh that against the catch — the freed-up cash (and any of it left outside super) becomes an assessable asset that can trim their part-pension, where the home was exempt — and to model the pension effect before committing, because for a part-pensioner it can materially change the sums (ASIC MoneySmart, https://moneysmart.gov.au/manage-your-money-in-retirement/downsizing-in-retirement).

Is there a single right answer?

The honest conclusion is that none of these is "the best" — the right choice depends entirely on you: whether you want to stay or move, whether you need income or a lump sum, how cost-sensitive you are, and how much you want to leave behind. What matters is knowing that you have options, and that they're far more different from one another than most people assume. Because these are big decisions — often expensive to unwind, and emotionally loaded because they involve the family home — this is exactly the kind of choice worth taking to a licensed financial adviser before you commit.

Sources

• Services Australia — Home Equity Access Scheme
• Services Australia — Interest rate for loans under the Home Equity Access Scheme
• ASIC MoneySmart — Reverse mortgage and home equity release
• ASIC MoneySmart — Downsizing in retirement
• ASIC MoneySmart — Downsizer super contributions