See how debt and equity may change
A reverse mortgage can allow eligible older Australians to borrow against home equity, with interest commonly added to the loan rather than paid as regular repayments. That can make the debt rise over time and reduce the equity left in the property.
This projection makes the compounding visible by applying the entered loan rate, property growth, initial fee and drawdowns month by month. Consider modelling lower property growth and higher borrowing rates as well as the default case. It is educational only and cannot assess product safeguards, eligibility or whether a reverse mortgage is appropriate.
How to read the results
Projected remaining equity is projected property value less projected debt after the chosen years. Projected debt includes the initial loan and fee, compounded interest and any monthly drawdowns.
Projected LVR is debt divided by projected property value. It is a scenario metric, not a lending limit or guarantee; property values, interest rates, sale timing and protections in an actual contract can differ. A higher LVR indicates debt makes up a larger share of the assumed property value.
Worked example
Using the defaults—$1,100,000 current value, $250,000 loan, $1,000 fee, 8.3% interest, 3.5% property growth and no drawdown—the model projects debt of about $867,979 after 15 years.
The projected property value is about $1,842,884, leaving projected equity of $974,905 and a projected LVR of 47.1%. These figures depend heavily on the two assumed rates.
Assumptions and limitations
- The initial $1,000 fee is added to the opening loan balance.
- Interest compounds monthly at a constant 8.3% annual rate.
- Property value grows at a constant 3.5% annually.
- No voluntary repayments or monthly drawdowns occur in the default scenario.
- Sale costs, maintenance, insurance, rates and no-negative-equity protections are not modelled.
Frequently asked questions
Does the result guarantee equity will remain?
No. It is a mathematical projection and cannot guarantee property value, rates, longevity, fees or an eventual sale outcome.
What does a monthly drawdown do?
Each drawdown is added after monthly interest in this model, increasing the balance that may later attract interest.
Is this a reverse mortgage quote?
No. It does not include product-specific limits, eligibility checks, advice requirements or a provider’s contract terms.
This calculator and supporting information provide general estimates only. They do not take account of every product rule, tax consequence or personal circumstance and are not financial, tax, credit or legal advice.