# Reverse mortgage calculator

Estimated time: 10 mins

The reverse mortgage calculator helps you work out:

• How much your debt will increase over time and what this means for the equity in your home
• How changes in interest rates and house prices could affect the equity in your home

### About the reverse mortgage calculator

This calculator is designed to help you see if using a reverse mortgage could be worthwhile for you. This calculator allows you to:

• Explore 'What if?' scenarios to see the impact of interest rate and home value assumptions on your home equity
• Save the input values and retrieve your calculations at a later time. To save your inputs, set up a to your existing one (Internet connection required).
• Print the results of this calculator

The instructions set out in this calculator for the making of equity projections have been approved by ASIC for the purposes of s 133DB(1)(a) of the National Credit Act and reg 28LD(2) of the National Credit Regulations.

### What is a reverse mortgage?

With a reverse mortgage you borrow money using the equity in your home as security. Interest is typically added to your loan and compounds over time. Repayments are generally not required while you live in your home.

Equity is the part of your home that you own outright; it is the balance you receive after your loan is repaid.

The outstanding loan is the total amount that you owe; it is the total amount borrowed, including the accumulated interest and fees.

The home equity you have in the future will depend on the following factors:

• The future value of your home
• How much you borrow and when
• Interest and fees

### Assumptions

Amounts calculated are estimates; you may end up with more or less equity in your home. This is not a prediction or a forecast about interest rates or home values by ASIC. ASIC does not forecast economic or market conditions or regulate residential property markets.

The calculator assumes the following:

• Increase/decrease in property value - Your house value is updated each year using the increase/decrease rate entered in the calculator (Step 1). The calculations assume a constant rate (although in reality this rate will rise and fall). It is safer to enter a conservative property growth rate, especially if you are looking for a reverse mortgage for 5 years or less, as house prices may not increase at all and may even decrease.
• Interest rates - Interest rates will remain constant over the life of the loan (although in reality interest rates may fluctuate over time). Financial institutions may calculate interest payments differently, which may vary outcomes. Actual interest rates and fees may vary from those used in this calculator.
• Fees - Ongoing fees will remain constant for the life of the loan (although in reality fees may vary over time). Establishment fees are added to the loan.
• Outstanding loan - The loan is calculated each month by adding any payments made to the borrower, interest charges and fees to the outstanding loan balance from the previous month. The calculator assumes that no repayments are made during the life of the reverse mortgage.
• Home equity remaining - The remaining home equity is calculated by subtracting the outstanding loan from the value of your home.
• Negative equity protection - Mortgages taken out on or after 18 September 2012 are subject to negative equity protection. This means that you cannot owe the lender more than the home is worth. If the home is sold the lender must accept the sale proceeds as full settlement of the debt (except in cases of fraud or misrepresentation).

### Disclaimer

The results of this calculator are not advice in relation to a financial product. You should consider obtaining advice from a licensed financial adviser or credit provider before making any financial decisions about a reverse mortgage.

You will need to satisfy the lending criteria of a credit provider to get a reverse mortgage.

Whilst the Commonwealth, represented by ASIC ("ASIC"), is the developer and owner of the Reverse Mortgage Calculator ("Calculator"), the Calculator is available for use by members of the public as well as financial advisors and as such ASIC has no direct control over the results generated by such Calculator. ASIC therefore does not guarantee, and accepts no legal liability whatsoever arising from or connected to, the accuracy, reliability, currency or completeness of any data entered or assumptions inserted when using such Calculator. Users should seek appropriate independent professional advice prior to relying on, or entering into any commitment based on any results generated by the calculator. By entering ASIC's MoneySmart website and by using the Calculator, the user will be deemed to have released and have discharged ASIC, from all liability in respect of any loss suffered as a result of relying on the information generated by the Calculator.

The use of the Calculator by a financial advisor does not constitute an endorsement or a recommendation by ASIC of any products or services or of any third party products or services offered by such financial advisor. ASIC hereby excludes all liability to the extent permissible by law.

### How lenders can use the calculator

Lenders who use this calculator must choose their lender institution from the drop-down menu within Settings . This will:

• Apply the lender's borrowing limits, including the LVR, minimum borrower's age and maximum loan amount
• Enable lender to enter their contact details and/or Notes for the client's reference in Step 7 of the calculator (optional feature). These will appear in the printout from the calculator. Note: Step 7 only appears if a lender is selected in Settings.

To find out more about how lenders should use this calculator please see ASIC's Information Sheet.

To update lender limits or include a lender that does not appear in the drop-down menu, please email feedback@moneysmart.gov.au.

## Reverse mortgage calculator FAQs - frequently asked questions

### Q. How do I retrieve a saved calculator?

A. To retrieve a saved calculator, go to the relevant calculator and click on the "select saved calculator" dropdown menu in the toolbar (see example below) and select your previously saved calculator from the list.

### Q. Do calculators save data automatically?

A. No, you will need to click on the "Save" icon if you wish to save your budget.

### Q. Why can't I see your calculators on my iPad or iPhone?

A. This calculator was built using Flash at a time when Flash was accessible to the majority of internet users. Since then, iPads and iPhones have become very popular and they do not support Flash files. The MoneySmart team are recreating all our calculators in a format that will be usable on all devices. Unfortunately, this process will take a while, so stay tuned!

### Q. Are there advanced settings I can change?

A. Yes, within the calculators that you can save, there are some defaults and assumptions that you can adjust as required. These can be found within the "How it works" or "Settings" sections.

### Q. Why doesn't it allow me to enter an age younger than 50?

The reverse mortgage calculator will not let you enter an age younger than 50 because most lenders will not offer a reverse mortgage to anyone under age 60.

### Q: I have entered my details but nothing happens, what do I do next?

A: Use the forward and back arrows at the bottom of the page to go from one screen to the next.

### Q: Can I change the default settings?

A: No, the default settings have been provided by individual lenders offering this product.