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Reverse Mortgage Calculator

Do you want to estimate what your remaining equity balance will be a few years out from today? Use this Reverse Mortgage Calculator to help determine your future loan balance.

This handy tool is designed to show you how compounding interest can make the outstanding balance of a reverse mortgage rapidly grow over a period of time, and allow you to use the equity in your property at the age of retirement.

What is a Reverse Mortgage?

A reverse mortgage allows older homeowners in Australia to access cash from their property’s equity without selling it or making ongoing payments. Homeowners over 60 years old can receive a loan from a lender based on their home’s equity, which they can get as a lump sum, regular income, line of credit, or a combination.

The loan is usually repaid after the homeowner sells the property, moves out, or deceases, and the lender covers any remaining balance if the sale doesn’t cover the loan. While reverse mortgages can be a helpful tool, homeowners should consider the associated risks and costs and seek financial advice before applying.

Why Opt for A Reverse Mortgage?

The details of reverse mortgages are confusing, as they are calculated, assessed, and charged repayments in a manner that differs from any other home loan.

Designed for retirees who wish to avoid cash flow liabilities while drawing funds for lifestyle and living expenses, reverse mortgages draw equity from their home and increase the loan amount rather than charging a monthly repayment.

This results in a situation where the debt continuously grows until it is repaid, typically when the property it is secured against is sold. To mitigate the risk of the debt exceeding the property value, lenders generally keep the starting loan balance low, up to 25% of the property value, although this varies depending on each lender’s policies, the borrower’s age, and other factors.

Things To Consider Before Getting a Reverse Mortgage

Before obtaining a reverse mortgage, consider the following:

  • Eligibility: You must be 62 years of age or older and own your home outright or have a substantial amount of equity in the house.
  • Loan terms: Understand the interest rate, amount of money you can borrow, and repayment terms associated with a reverse mortgage.
  • Counselling: Attend a counselling session with a HUD-approved counsellor to comprehend the costs and risks involved with a reverse mortgage.
  • Long-term planning: Evaluate how a reverse mortgage fits into your overall financial plan and consider your long-term financial goals.
  • Potential impacts: Recognise the potential impacts of a reverse mortgage on your estate and inheritance.
  • Other options: Consider other options such as downsizing or taking out a home equity loan or line of credit.

How To Pay Reverse Mortgages

Reverse mortgages can be paid in various ways, such as lump sums, fortnightly payments, or through a loan account, where interest is only charged as the funds are drawn out. Our reverse mortgage calculator provides the flexibility to choose the preferred option, and the results will adjust accordingly.

Need Professional Advice About Reverse Mortgages?

If you’re contemplating whether a reverse mortgage is the right option for you, it may be beneficial to consult with an Excellence Finance mortgage broker. However, it’s important to note that the calculations provided by all our calculators do not encompass all fees and charges.

The results are only estimates and should not be solely relied upon when making a loan decision. As interest rates and costs can fluctuate over time, borrowers should seek the advice of a qualified Australian Credit Licensee or Authorised Credit Representative, taking into account their individual circumstances.

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