Equity release costs money in one of two structurally different ways, and the two don’t share a formula. A reverse mortgage and the government’s Home Equity Access Scheme (HEAS) create a debt, and that debt compounds — interest is charged on the interest already added, so the balance grows faster the longer the loan runs, regardless of what the property is worth. Home reversion and a fractional sale create no debt at all: the cost is a share of the property’s future value, given up in exchange for money today, realised only when the property is eventually sold or the share is bought back. Fees sit on top of whichever mechanism applies, and on a fractional sale, some of those fees are themselves charged month by month.

None of the four is cheaper than the others in the abstract. Which one costs less over ten or twenty years depends on the interest rate, how long the arrangement runs, and what happens to the property’s value — inputs nobody can know in advance, and this article won’t guess at them. What it can do is show how each mechanism actually behaves, with the maths worked through using real, sourced figures.

How does compounding interest make a reverse mortgage or HEAS cost more over time?

Compounding means interest is calculated on the balance owing — including interest already added in earlier periods — not just on the amount originally drawn. That’s what makes a reverse mortgage’s cost accelerate the longer it runs, even without a single extra dollar drawn against it. The general shape of the maths, in a highlighted formula:

Loan balance after n compounding periods = amount owing × (1 + periodic interest rate)ⁿ

Every private reverse mortgage lender sets its own interest rate, fees and criteria — none of those figures is fixed by law, so no single verified rate exists for “a reverse mortgage” in general. HEAS is different: it’s a Commonwealth scheme with one published rate, so it’s the figure this example can actually work through.

Hypothetical example — illustrative only, not a projection. As at July 2026, the HEAS interest rate is 3.95% per year, compounding fortnightly (Services Australia) — a periodic rate of roughly 0.152% every fortnight. Assume a round $100,000 drawn as a lump sum, with no further draws and no repayments made along the way (repayment terms themselves sit outside the scope of this article). Applying the formula above:

Years elapsed	Loan balance (hypothetical)
5	≈ $121,800
10	≈ $148,400
15	≈ $180,800
20	≈ $220,200

This table shows the debt side only — it makes no assumption at all about what the property is worth, now or later. That’s deliberate: compounding interest grows against the loan balance, full stop, whatever the home’s value does. The rate itself isn’t fixed for the life of the scheme either — it’s set administratively and can change, so check the current figure on the Services Australia website before relying on it for anything beyond this illustration.

A private reverse mortgage compounds on the same principle, just with a rate, fees and minimum age set by the individual lender rather than by government. Moneysmart — ASIC’s free consumer website — explains the mechanism in more detail. Reverse mortgages taken out from 18 September 2012 carry a statutory backstop regardless of the lender: negative equity protection, meaning “you can’t end up owing the lender more than your home is worth.” Contracts signed before that date may not include it.

What does home reversion’s upfront discount cost you over time?

Home reversion works on entirely different maths. A provider pays a lump sum today for a share of your home’s future sale proceeds — no interest, no compounding, and nothing added to a balance month by month. The cost is fixed the day you sign: the size of the discount you accepted, plus the share of future value attached to it, whatever that share eventually turns out to be worth.

In Moneysmart’s own worked example, a provider buying a 20% share of the future value of a $500,000 home might offer between $37,000 and $78,000 today, depending on the owner’s age. ASIC research from 2005 found providers paying 35–60% of the market value of the share sold — dated research, not current data, but it shows the scale of the discount involved. As at July 2026, at least one provider (Homesafe) operates, offering home reversion agreements in metropolitan Melbourne and Sydney.

Because there’s no compounding balance, there’s no years-elapsed table to build for this option the way there is for a debt. The only thing time changes is when the share is realised — and what the property is worth at that point is something this article can’t state as fact, project, or assume a growth rate for. That’s a genuine limitation of comparing the two structures: one has a number that grows in a way you can chart in advance; the other has a number that’s fixed today but paid out against an unknown future value.

Home reversion also sits outside the consumer credit framework altogether, because no interest is charged. That means the negative equity protection covering post-2012 reverse mortgages does not apply here.

What does a fractional sale cost over the life of the arrangement?

A fractional sale — the MyBrix model — sells fractional interests in your home’s future value, called Brix, in exchange for money today. It combines both kinds of cost: fees, some of them running with time, and a share of future value sold. The owner-side fees, as at July 2026, are:

MyBrix owner fee	As at July 2026	Timing
Property assessment	$99	Once
Manual valuation assessment (where required)	$999	Once
Funding application	$1,499–$1,999 per listing	Once
Funding fee	5.0% upfront, or 0.1% per month deferred	Either once, or monthly
Occupation fee (where agreed)	0.2%–0.5% per month of funded amount	Monthly
Selling management fee (if the property is sold)	5% of gross sale price, proportional across all Brix holders	Once, at sale

The funding fee is one or the other, agreed per listing: 5.0% of the funded amount upfront, or 0.1% per month if deferred. Fees include GST, are generally non-refundable, and some may be payable even if funding doesn’t proceed. It’s worth being direct about this: a fractional sale is not a zero-time-cost option just because it isn’t a loan — the deferred funding fee and any agreed occupation fee are ongoing monthly amounts, and they keep accruing for as long as the arrangement runs.

Hypothetical example — illustrative only, not a projection. Take a round $200,000 funded amount, the deferred funding-fee option (0.1% per month, rather than the 5.0% upfront alternative), and no occupation fee for simplicity. At 0.1% a month, that’s $200 in the first month, $2,400 over a year, and $12,000 over five years, assuming — unrealistically, for illustration only — that the funded amount and the fee rate never change. Add an occupation fee if one is agreed under the arrangement — 0.2% to 0.5% a month on the same $200,000, so $400 to $1,000 a month — and the monthly total climbs further.

This is simple monthly accrual on a fixed funded amount, not compounding interest on itself. It leaves out the arrangement’s larger cost: the share of the property’s future value attached to the Brix sold, realised only when the property is sold or the Brix bought back — which this example, like the reversion example above, can’t put a figure on without assuming a growth rate it has no basis to state.

A short-term facility, where agreed, can also carry a balloon payment fee of 10% to 30% at its end, and extending the term costs 10% of the value of current Brix holdings — both further costs that arrive at a point in time rather than growing continuously like compounding interest.

How do the three cost structures compare?

Assumptions behind this comparison: an owner-occupied residential property; the reverse mortgage/HEAS column describes debt-based options generally, with the numeric example above using HEAS’s published rate as at July 2026; the fractional sale column reflects MyBrix’s published terms as at July 2026 (PDS v4.0); individual lenders and providers set their own rates, fees and criteria, which vary. Figures, where given, are as at July 2026.

	Reverse mortgage / HEAS	Home reversion	Fractional sale
What’s created	A debt	Sale of a future-value share	Sale of fractional interests
Interest	Yes — compounds over time	None	None
Fees	Set by the lender or scheme; vary	Set by the provider; vary	$99–$1,999 one-off; 0.1%–0.5% monthly (MyBrix)
What drives the cost	Time — longer term, larger debt	The property’s value when the share is realised	Both — time-based fees plus the future-value share
Statutory protection	Negative equity protection (post-2012 loans)	None — outside the consumer credit framework	Corporations Act disclosure (PDS/TMD), not credit law

The table shows structure, not a ranking. A compounding debt can end up costing less or more than a share of future value sold — it depends entirely on the rate, the term, and what the property turns out to be worth, none of which this article can predict. Neither structure is inherently cheaper than the other, and no figure in this article should be read as a claim that it is.

What else shapes the real cost for you?

Time horizon. A compounding debt’s cost is largest the longer it runs. A future-value share’s cost is fixed at signing but paid out against whatever the property is worth when it’s realised. The two curves don’t meet on the same axis, which is exactly why this article compares their mechanics rather than picking a winner.

Your Age Pension. Converting value held in your home into money or other assets can change how your entitlements are assessed, on any of these options. Payments can be affected in ways specific to your situation — contact Services Australia’s free Financial Information Service before proceeding.

Tax. How proceeds from a loan, a discount payment, or a sale of interests are treated for tax purposes differs by option and by your circumstances. Tax outcomes depend on your circumstances — speak with a registered tax agent before acting.

Your estate. A compounding debt is repaid before anything passes to your estate; a share already sold is simply gone from what your estate eventually receives. Either way, less of the home’s value flows through. Speak with an estate planning lawyer about how this interacts with your will and estate.

Where can you check these figures yourself?

Services Australia publishes the current HEAS rate, caps and formula directly — always check there before relying on a figure quoted elsewhere, including this article. Moneysmart — the Federal Government website brought to you by ASIC — covers reverse mortgages and home reversion in more depth, though it does not publish a current typical discount range for home reversion; the ASIC 2005 research behind the 35–60% figure above is available in full. For MyBrix’s complete, current fee schedule, the Product Disclosure Statement and Target Market Determination at mybrix.com.au are the authoritative source. General information can show how each cost mechanism behaves; it can’t tell you which one will turn out cheaper for your home, your term, or your circumstances. A licensed financial adviser can help with that comparison.