Reverse mortgages get a lot of attention because they are marketed by financial institutions and sold mostly by advisers on commissions. They are equity-release products where those aged over 60 take out a loan against the equity in their home. The loan is repaid when they sell the home to go into a retirement home, or repaid from the estate when they die. As no repayments are made on the loan, the interest capitalises.

The Australian Securities and Investments Commission has published a booklet on using equity in the home. According to its calculations, someone taking out a $50,000 loan at 60 could owe $232,000 in 15 years' time and more than $1 million in 30 years.

Despite all of the warnings about how quickly the debt can grow, there is no doubt reverse mortgages have a role to play. We have too much of our wealth in the family home and want to maintain our lifestyle in retirement. So it's inevitable reverse mortgages are going to be big business, particularly as commission-driven salespeople are pushing them.

That is why ASIC has produced a useful booklet on the dangers of reverse mortgages and it points to a cheaper alternative. Many readers would not be aware there is something called the pension loans scheme. This is where Centrelink and the Department of Veterans' Affairs will lend money to people on a partial age pension, where the loan can be repaid at any time in whole or in part, or from the sale proceeds of the house or from the estate.

It is more limited than a reverse mortgage in that the money can only be taken as an income stream, not as a lump sum. Also, the maximum that can be borrowed is the amount that, added to their existing part-pension, takes them to the maximum pension. The minimum age is the age-pension age, which is 65 for men, while eligibility for women ranges from 63? to 65, depending on when they were born.

For the reverse mortgage, the normal minimum age is 60 and potentially more can be borrowed than with the pension loan scheme. The age pension (plus the pension supplement) is just over $500 a week for a couple. So, if the couple was drawing a part pension of $200 a week they could borrow an income stream of up to $300 a week, subject to the value of the home, the minimum equity the borrower wants to retain in the house and the age of the borrowers, among other factors. Potential borrowers would need to check with Centrelink or the Department of Veterans' Affairs to make sure their pension and any other entitlements are not affected.

Access to the loan pensions scheme is much wider than it may seem at first.

Retirees can get access to the pension loan scheme even if they are not getting the age pension. They may be eligible for the scheme if they meet either the income test or the assets test.

The upshot is that many retirees who are considering a reverse mortgage may get a much better deal from Centrelink or Veterans' Affairs than from the private sector providers of reverse mortgages. The interest rate is lower than for reverse mortgages. It is equal to 5.25 per cent a year, which has remained unchanged for more than 10 years and is well below that of reverse mortgages.

Anyone contemplating a reverse mortgage would do well to investigate the pension loan scheme first.

For a copy of the guide, "Thinking of using the equity in your home", visit ASIC's website at fido.gov.au or phone 1300 300 630. For more information on the pension loans scheme call Centrelink's information line on 13 23 00.