MoneySmart releases reverse mortgage calculator
Financial literacy website MoneySmart has launched a new reverse mortgage calculator to help consumers better understand the financial implications before they decide to release equity from their homes.
The Australian Securities and Investments Commission (ASIC) senior executive for financial literacy Robert Drake said the tool was developed in response to recent legislative changes which would require lenders and brokers to show customers a range of scenarios using the MoneySmart website.
Lenders and mortgage brokers will have to provide a copy of the projections to the consumer before assessing whether the proposed loan would be suitable.
"If you decide that a reverse mortgage is the right way to go, you can also use the calculator to explore how much to borrow, including how much as lump sums and how much as monthly payments," Drake said.
The calculator shows how much a person's debt may increase over time, what this may mean for the equity in their home and how it can be affected by interest rate and house price changes over the years.
MoneySmart, which is run and operated by ASIC, has warned consumers about reverse mortgages charging higher interest rates then regular home loans, calling on them to carefully read the terms and conditions of such products.
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