Reverse Mortgage Calculator Australia

What the reverse mortgage calculator does

A reverse mortgage lets older homeowners borrow against the value of a home they own, without making regular repayments. Instead of paying the loan down, the interest is added to the balance and the debt grows over time. This reverse mortgage calculator projects that growing debt year by year, compares it against the changing value of the home, and shows how much equity you have left at each point.

The result is a clear picture of a trade-off that is easy to underestimate: releasing money today in exchange for a shrinking share of your home's value tomorrow.

How a reverse mortgage works

With a standard home loan you borrow a lump sum and pay it back gradually, so the balance falls. A reverse mortgage works the other way around. You draw funds, make no scheduled repayments, and the interest is capitalised, meaning it is added to what you owe.

Key features that shape the numbers include:

• No regular repayments. Interest accrues and joins the loan balance rather than being paid off.
• Compounding. Once interest is added, it earns interest too, so the debt accelerates in later years.
• You keep ownership. You remain the owner and can usually live in the home until an agreed trigger event.
• Repayment on exit. The loan is generally repaid when the home is sold, you move permanently, or from your estate.

How the calculation works

The calculator takes a starting loan amount, an annual interest rate, and the number of years you want to project. Each year it adds the interest to the outstanding balance, so the following year's interest is charged on a larger figure. That is the compounding effect that makes the total climb.

At the same time, it applies your assumed rate of home value growth to the property, producing an estimated value for each year. The equity left is simply the projected home value minus the projected loan balance. Watching those two lines move apart, or together, is the point of the exercise.

The formula

Each year, the loan balance is the previous balance plus that balance multiplied by the interest rate. Each year, the home value is the previous value plus that value multiplied by the growth rate. Equity remaining is the home value minus the loan balance.

Why compounding matters so much

The single most important idea to grasp is that an unpaid interest bill does not stay still. In the early years the debt may look manageable, but because nothing is being repaid, each year's interest is larger than the last. Over a long horizon the balance can grow substantially.

Whether your equity holds up depends on the race between two rates: how fast the debt compounds versus how fast the home appreciates. If your home grows in value at a similar pace to the interest rate, your equity may erode slowly. If the interest rate is well above the growth rate, equity can shrink much faster. Modelling both sides is exactly what the calculator is for.

When to use it

This tool is useful when you are:

• Weighing up whether to release equity from your home in retirement
• Comparing how different interest rates change the long-run debt
• Testing how conservative or optimistic home value assumptions affect the equity you leave behind
• Thinking about the inheritance or funds that might remain for aged care or family

Running several scenarios, rather than a single one, gives a more honest range. Try a cautious home growth assumption alongside a higher interest rate to see the downside case.

Protections to be aware of

Regulated reverse mortgages in Australia typically include a no negative equity guarantee, which is designed so that you generally cannot owe more than the property is worth when it is sold. There are also rules around responsible lending and considerations for anyone still living in the home. These protections are important, but the details vary between lenders and change over time, so confirm the current terms directly rather than relying on general descriptions.

Fees, set-up costs and the way interest is charged also differ between products and are not always captured by a simple projection. Treat the calculator's output as the shape of the outcome, not the final cost.

A simple worked example in words

Imagine drawing a sum against a home and making no repayments. In the first year the interest added is modest, so the debt barely moves relative to the property. But because that interest joins the balance, the second year's interest is charged on a slightly larger figure, and the third year's on a larger one still. Meanwhile the home may be appreciating in the background.

If the home grows roughly in step with the interest charged, the equity you hold shrinks only gradually, because both sides of the ledger are rising together. If the interest clearly outpaces home growth, the debt catches up faster and equity falls more sharply. The calculator lets you watch this interplay across your chosen horizon rather than trusting intuition, which tends to underestimate how compounding behaves over ten or twenty years.

Things to keep in mind

The projection depends entirely on the assumptions you feed it. Interest rates can change, home values do not rise in a straight line, and your personal circumstances may shift. A reverse mortgage can affect eligibility for some government payments and can reduce the amount left to an estate, so it is a decision with long-term consequences.

Use the results to compare scenarios and understand the mechanics, then confirm anything that matters with your lender and a licensed adviser before committing.

This is general information, not financial advice.

About This Reverse Mortgage Calculator

Use this reverse mortgage calculator to get an instant, accurate estimate. The figures follow official ASIC MoneySmart guidance and every rate and threshold is kept up to date for 2026. Adjust the inputs above to match your situation, or browse all our calculators to plan your next step.