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Reverse Mortgages
September 21, 2026

What Happens to the Monthly Interest on a Reverse Mortgage?

Tim Lesina
UNO Broker
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Tim Lesina
UNO BROKER
Mollymook, NSW
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September 28, 2026
Great question. The monthly interest is calculated daily by the lender on your outstanding loan balance. Then, once a month the lender totals up all the interest for that month & adds it back into the loan balance. There is no requirement for you to physically pay this interest amount each month. Therefore, there are no loan repayments at all. Adding interest back onto a loan balance is called interest capitalisation, and that is how Reverse Mortgages work. Over time, your loan balance will increase.