Now becoming more popular, these loans are designed for the ageing population who use the equity in their property to raise cash for any worthwhile purpose, for example, to support retirement income or pay medical expenses. The borrower does not make any repayments. The interest charged is added to the loan each month. The loan and the accumulated interest is repaid when the borrower sells or moves out of the property or dies.

Further information is available on the SEQUAL site. It is important to understand the future debt of this type of loan – try the ASIC calculator.

Tip: These are specialised loans with most lenders requiring that borrowers seek independent financial and legal advice as part of the condition of their loan. Pensions may be affected. (See related links to Centrelink and also seek advice from your regional Centrelink Financial Information Services officer.)