Reverse Mortgage Calculator

How Reverse-Mortgage Interest Compounds

A reverse mortgage balance grows when interest and financed fees are added to your borrowing. With no repayments, later interest applies to the original borrowing and earlier interest. This reverse mortgage calculator projects that balance and the equity left in your home.

The starting example draws $125,000 against a $500,000 home and finances a $1,000 setup fee. At 7% annual interest compounded monthly, the balance reaches $358,967 after 15 years without further draws or repayments. Total interest is $232,967.

First, the model adds your lump sum and setup fee to any existing balance. Each month, it adds the regular drawdown and one-twelfth of yearly fees, then charges one-twelfth of the annual interest rate. It subtracts your voluntary repayment last, capped at the amount due.

Regular drawdowns and yearly fees continue for the selected term even after a repayment clears the balance. Set them to zero to model a closed account. The yearly table shows the balance; the CSV also includes cumulative interest, drawdowns and repayments for every year.

Remaining Home Equity

Remaining home equity is your projected property value minus the projected loan balance. The model compounds property growth once a year and keeps the interest rate constant. Property growth assumptions describe scenarios, not future price forecasts.

With the starting 3% growth assumption, the $500,000 home becomes $778,984 after 15 years. Subtracting the $358,967 balance leaves $420,016 in equity. With no growth, the same debt leaves $141,033.

The comparison keeps your borrowing unchanged and shows flat prices alongside your selected growth rate and rates two percentage points lower and higher. A negative growth rate models falling prices. Enter your property's value in NSW or any other Australian state; location does not alter this scenario formula.

A negative equity result means the mathematical debt exceeds the assumed property value. The tool retains that shortfall so you can see the exposure. Applicable negative equity protection limits the eventual amount repayable under the contract; the tool does not calculate that protected repayment.

The Australian Securities and Investments Commission (ASIC) explains negative equity protection and how older contracts differ in its Moneysmart reverse-mortgage guide. That protection does not guarantee money will remain for aged care or an inheritance.

Lump Sums and Regular Drawdowns

Borrowing later reduces the time that each drawdown attracts interest. For the same total amount borrowed, regular drawdowns generally accumulate less interest than taking everything at the start.

Compare these hypothetical one-year examples with a 12% annual rate compounded monthly, no opening debt, fees or repayments. Both provide $12,000 in new borrowing. The regular pattern draws $1,000 at the start of each month.

The $713 difference comes from the timing of borrowing. The regular pattern supplies the money gradually, so it cannot fund a $12,000 expense at the start. Voluntary repayments reduce future interest, subject to the product's repayment terms.

Government Scheme and Lender Differences

This is a balance projection, not a maximum-advance or eligibility calculator. A private lender's available advance depends on its product rules and the borrower's circumstances, including age and the property. Entering a large amount here does not establish that it is available to borrow.

The government's Home Equity Access Scheme is a separate loan through Services Australia. Its published interest rate is 3.95% a year, compounded fortnightly. This tool compounds monthly and does not reproduce the scheme's payment caps, age-based maximum loan or eligibility rules.

Use the official Home Equity Access Scheme page and its calculators for a government scheme estimate. Services Australia provides both eligibility and borrowing calculators, with a more personalised estimate through a Centrelink online account.

For a private reverse mortgage, the lender's projection uses its actual rate, drawdown dates and fees. Moneysmart explains that a lender or broker must go through reverse-mortgage projections with you. Compare the effect on your equity over the years you may need the loan, including the money you want available for later care.