Retiring with a mortgage?

27 October 2017

Most Australians aim to pay off their home loan well before they face retirement but for a growing proportion this might not be possible. Residential property is the major component of wealth for many older Australians who are close to retiring, but the boom in house prices has also led to an increase in debt and an increasing number of baby boomers are carrying mortgages into their retirement. The 2015 “Housing Decisions of Older Australians” report by the Productivity Commission indicates that close 20 per cent of Australians aged 60+ have an outstanding mortgage on their home. This compares with 14 per cent in 2010, according to then-current data from The Household, Income and Labour Dynamics in Australia (HILDA) Survey, completed by Melbourne Institute.  The data also shows an uptrend in the size of outstanding balances in the five years to 2015, with a third now having outstanding balances of $50-100k and a further third having outstanding mortgage balances greater than $100k.  Of those with outstanding mortgages, 42% do not expect to have their mortgages paid off by the time they retire.

Alongside this, home equity is growing as house prices rise. However, in a recent (2017) study conducted by the Australian Housing and Urban Research Institute (AHURI), it was found that a $1,000 increase in house value is associated with a $240 increase in household debt among home owners.With some small variation for age band, the Productivity Commission data also shows that fewer than half of respondents would be comfortable carrying debt into retirement. Many intend to clear their outstanding mortgage debt on retirement, but against this, some 53 per cent of households surveyed have less than $200k in household savings and investments (this includes superannuation and other investments but excludes the family home).  For many, while their equity may be rising on current price trends, this component of their wealth doesn’t factor at all in their retirement funding plans.

Putting all this together, for the one in five households carrying a mortgage into retirement, paying the mortgage off is likely to take a big bite out of their retirement savings.  Of 60-64 year olds surveyed, slightly more than half expect to be retired for 10-15 years or more. Those households with a combination of outstanding home loans and low retirement savings may be reliant on the age pension sooner rather than later. For many of these households wanting to live more comfortably than the pension affords, there will be a compelling case for including some means of accessing the equity in the family home in their retirement plans, either through a reverse mortgage arrangement, home reversion scheme or a similar financial product.


Stuart Thomas and Sarah King Sinclair

Placemaking Economics Group

School of Economics, Finance and Marketing

RMIT University



Heartland has partnered with the RMIT University’s School of Economics, Finance and Marketing to develop a series of articles on aging in place. We are pleased to be able to provide their knowledge and research through our Reverse Mortgage News.


Information provided is accurate as at 27 October 2017 and may change from time to time