Reverse mortgage calculator

Q. What is a reverse mortgage?

A reverse mortgage allows you to borrow money using the 'equity' in your home as security.

'Equity' is the value of your home, less any money that is owing on your mortgage.

Depending on your age and lender policy, you can take the amount you borrow as a:

• regular income stream
• line of credit
• lump sum, or
• combination of these

You will need to meet the lending criteria to get a reverse mortgage.

To find out more, see reverse mortgage and home equity release.

Q. How does a reverse mortgage work?

You stay in your home and don't have to make repayments while living there. Interest charged on the loan compounds over time, so it gets bigger and adds to the amount you borrow.

You repay the loan in full, including interest and fees, when:

• you sell your home
• you move out of your home, or
• your deceased estate sells your home

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

• the future value of your home
• how much you borrow and when
• interest and fees

To find out more, see reverse mortgage and home equity release.

Q. Why does ASIC include products if it doesn't endorse them?

Reverse mortgage product rates and conditions vary. ASIC does not endorse any of the products in the calculator. They are included to help you see how your home equity may change over time, depending on your choices.

Your lender or broker must use the calculator to go through reverse mortgage projections with you. Get a copy of the calculator results to take away and ask questions if there's anything you're not sure about.

Q. Can I use this calculator on my phone?

Yes, you can use this calculator on your phone. But, due to the amount of information displayed for this calculator, that is not the ideal device to use.

For an optimised experience, please use your computer or tablet so you have a bigger screen to analyse the results.

Q. Why doesn't it allow me to enter an age younger than 55?

Most lenders don’t offer a reverse mortgage to anyone under age 60. The calculator is set so that the youngest age you can enter is 55.

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

Use the next button at the bottom of the page to go from one screen to the next.

Q. Can I change the default settings?

No, the default settings have been provided by individual lenders. They reflect the specific reverse mortgage products included in the calculator.

Q. Do I still need to get professional advice if I use the calculator?

The results of this calculator are not advice about a financial product. Consider getting advice from an independent professional (such as a licensed financial adviser, lender or mortgage broker) before making a decision about a reverse mortgage.

Amounts calculated are estimates – you may end up with a different amount of equity in your home. It's not a prediction. ASIC does not forecast economic or market conditions, like interest rates, or regulate the residential property market.

The calculator assumes:

• Property value – Your house value is updated each year based on the growth rate you choose. While constant growth is assumed, it is safer to use a conservative estimate. House values may not increase in the short-term and could decrease.
• Interest rates – Are constant over the life of the loan. But interest rates may vary over time, so check with the lender.
• Fees – All unpaid fees are added to the loan, and ongoing fees are assumed constant over the life of the loan. But fees may vary over time, so check with the lender.
• Repayments – No repayments are made during the life of the loan. Talk to the lender if you want the option to make repayments.
• Home equity remaining – This is the value of your home that you still own, after subtracting the total outstanding loan amount.
• Negative equity protection – Reverse mortgages taken out since 18 September 2012 have negative equity protection. This means you cannot owe the lender more than the value of your home. When your home is sold, the lender must accept the sale proceeds as full settlement of the debt.

The Australian Government, represented by ASIC ("ASIC"), is the developer and owner of the reverse mortgage calculator on Moneysmart ("the calculator").

ASIC can include a product in the calculator when:

• the lender holds an Australian Credit Licence (or is exempt from holding a licence), and
• the product is a reverse mortgage

By including a reverse mortgage product in the calculator, ASIC does not endorse the lender or the product. Calculator users should not rely on the lender or product’s inclusion in the calculator when considering if a product is suitable for them.

The calculator may be used by members of the public, financial advisers, lenders and mortgage brokers. ASIC has no direct control over the results generated by such use.

ASIC does not guarantee and accepts no legal liability arising from, or connected to, the accuracy, reliability, currency or completeness of any data entered or assumptions made when using the calculator.

By using the calculator, the user releases and discharges ASIC from all liability relating to any loss suffered as a result of relying on information generated by the calculator.

The results of this calculator are not advice about a financial product. ASIC encourages calculator users to seek independent professional advice before getting a reverse mortgage based on any calculator results.

You will need to meet the lending criteria to get a reverse mortgage.

The use of the calculator by a lender, mortgage broker or financial adviser does not constitute an endorsement by ASIC of any products or services, or of any third party products or services, offered by them. ASIC hereby excludes all liability to the extent permissible by law.

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.

How to use the calculator

When using this calculator, please choose a lender institution/products from the drop-down menu at the start of the calculator. This will:

• apply the appropriate borrowing limits, including the loan to value ratio (LVR), minimum borrower's age and maximum loan amount
• enable you to enter contact details and/or notes for your client's reference in the report settings of the calculator (optional feature). These will appear in the printout from the calculator

ASIC does not endorse any reverse mortgage product or lender it includes in the calculator. Please remind calculator users not to rely on inclusion of a product or lender in the calculator when considering if a product is suitable for them.

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

How to ask for a product to be added to the calculator

ASIC can add a product to the reverse mortgage calculator when:

• the lender holds an Australian Credit Licence (or is exempt from holding a licence), and
• the product is a reverse mortgage

ASIC may ask questions about the product before adding it to the calculator. If so, it will liaise directly with the lender.

To update lender limits or request that your product be included in the drop-down menu, please email [email protected].