In short: Draw $100,000 against a $900,000 home at 8.50% p.a. and, with no repayments, the debt reaches $152,730 after 5 years, $233,265 after 10 and $356,265 after 15. At 3% house price growth the home is worth $1,402,171 by then, leaving $1,045,905 of equity. The debt doubles every 8.2 years, so time is the variable that matters most.
- Equity remaining then$1,045,905
- The debt doubles every8.2 years at this rate
- After 5 yearsDebt $152,730 · home $1,043,347 · equity $890,617
- After 10 yearsDebt $233,265 · home $1,209,525 · equity $976,260
- After 15 yearsDebt $356,265 · home $1,402,171 · equity $1,045,905
- Equity if house prices grow 0% instead$543,735
Reverse mortgages written since 18 September 2012 carry a statutory no negative equity guarantee, so you can never owe more than the home is worth. Compare with the government Home Equity Access Scheme, which is usually cheaper. This is an illustration, not advice — see an independent financial adviser.
Debt after 15 years: $356,265
That is a general estimate on standard assumptions. Every lender applies its own expense benchmarks, income shading and policy, so the real figure moves from lender to lender. Gorakh spent years as a senior credit officer deciding exactly these questions. Send him the numbers above and he will tell you what is realistic and which lenders fit — at no cost to you for home loans.
- A former senior credit officer reads itGorakh assessed loan applications on the lender side before he became a broker.
- A real office you can visit23 Astbury Crescent, Mickleham VIC 3064 · ABN 90 160 461 553
- Fees and complaints in writingRead the Credit Guide and our complaints and AFCA process before you commit to anything.
- English, Nepali and HindiInterpreters in other languages on request.
Prefer to talk first? Book a free 15-minute call 0426 403 703 Full 2-minute pre-assessment
A reverse mortgage lets an older homeowner borrow against the house without making repayments. Nothing is due until you sell, move into aged care or die. That is genuinely useful and genuinely expensive, and the cost stays invisible until you see the compounding written down.
How this calculator works
Enter your home's value today, the amount you want to draw, the interest rate, an assumed rate of house price growth and the number of years to project. The tool compounds the debt monthly with no repayments, grows the home value at your assumed rate, and reports the debt and the remaining equity at 5, 10, 15 and 20 years.
It also shows two things to look at first: how long the debt takes to double at the rate you entered, and what your equity would be if house prices did not grow at all.
The doubling number
At 8.50% p.a. compounding monthly, the debt doubles every 8.2 years. Ten years is more than a doubling. Twenty years is close to four times the original draw. If you are 68 and might live in the home for another 25 years, plan on the initial amount multiplying several times over.
The zero-growth line
Every reverse mortgage projection you will ever see leans on assumed capital growth. It is the assumption doing the reassuring. On the figures above, if house prices are flat for 15 years the remaining equity is $543,735 rather than $1,045,905, a difference of half a million dollars. The debt is certain; the growth is not.
Worked example
A Greenvale couple, both in their late sixties, own their home outright. It is worth $900,000. They draw $100,000 to renovate the bathroom, replace the car and clear a credit card. The rate is 8.50% p.a. for illustration and they make no repayments. House prices are assumed to grow 3% a year.
| Years from now | Debt owing | Home value at 3% growth | Equity remaining |
|---|---|---|---|
| 5 | $152,730 | $1,043,347 | $890,617 |
| 10 | $233,265 | $1,209,525 | $976,260 |
| 15 | $356,265 | $1,402,171 | $1,045,905 |
Read the first column on its own. They borrowed $100,000 and, without spending another cent, owe $356,265 after 15 years. That is $256,265 of interest, because interest is charged on interest every month.
Now read the last column. Equity still grows, because 3% on a $900,000 asset beats 8.5% on a small and growing debt, for a while. Push the projection far enough, or draw a larger amount, and the lines cross.
Protections you have
The no negative equity guarantee
Reverse mortgage contracts entered into since 18 September 2012 carry a statutory no negative equity guarantee. You can never be required to repay more than the net proceeds of selling the home, even if the debt has grown past the property's value. Your estate is not pursued for a shortfall. This is a legal protection, not a lender's goodwill, and it applies to all regulated reverse mortgages from that date.
Responsible lending obligations
Lenders must show you projections of the debt against the property value over time and discuss the outcomes with you, and you should be told about your right to remain in the home. Get the projection in writing, at more than one growth assumption.
Independent advice
Because the decision is usually irreversible in practice and affects your estate, get independent legal and financial advice, and have the conversation with your children early. Where title is held jointly the structure matters, and our page on joint tenants versus tenants in common explains why.
The cheaper option most people miss
Before taking a commercial reverse mortgage, look at the government's Home Equity Access Scheme. It is available to people of Age Pension age, including those who do not receive the pension because of the income or assets tests, and it lets you draw a fortnightly amount, a capped lump sum, or a combination, secured against Australian property.
Its interest rate has been set well below commercial reverse mortgage rates, which changes the compounding maths dramatically, and it also carries a no negative equity guarantee. The trade-off is that the amounts you can draw are capped. Check the current rate and rules, and read the explainer at moneysmart.gov.au, before signing anything commercial.
Alternatives worth pricing first
| Option | What it does | Main trade-off |
|---|---|---|
| Home Equity Access Scheme | Government-backed drawdown against your home | Capped amounts, fortnightly structure |
| Downsizing | Sell and buy something smaller, freeing cash | Stamp duty, moving costs, leaving the neighbourhood |
| A standard loan with repayments | Cheaper rate, debt does not compound away | You must be able to service it from income |
| Family assistance | A loan or purchase within the family | Needs documenting properly to avoid disputes |
| Selling an investment asset | Releases cash without touching the home | Capital gains tax may apply |
If you also own an investment property, releasing equity from that instead is often cheaper and keeps the home clear. The equity calculator shows what is available and our guide to using equity explains how lenders assess it. If the driver is high-interest debt, look at debt consolidation first.
What the calculator does not include
- Establishment, valuation, legal and ongoing fees, which are added to the loan and compound with it.
- Drawing more later. Many facilities allow further draws, and each one starts its own compounding clock.
- Age-based limits. Lenders typically cap the amount you can draw at a low percentage of the home's value at around age 60, rising by a percentage point or so for each year older. See how the ratio works in the LVR calculator.
- Age Pension effects. A lump sum you keep can be counted under the assets or income test. Ask Services Australia before drawing.
- The interest rate changing. Reverse mortgage rates are usually variable, so the doubling period can shorten.
Frequently asked questions
How much can I borrow with a reverse mortgage?
Lenders set the limit by age, usually starting at a modest share of the home's value in your early sixties and increasing with each year. Property type and location also matter, and some postcodes and apartment types are restricted. The relevant question is not the maximum but the minimum you actually need, because every extra dollar compounds for the rest of your life.
Will I lose my home?
No. You keep title and you have the right to remain in the home. The loan becomes repayable when the last borrower sells, moves permanently into aged care, or dies. Keep the property insured, keep rates paid and keep it in reasonable repair, since these are standard contract conditions and breaching them can cause problems.
Can I owe more than the house is worth?
Not on a regulated reverse mortgage entered into since 18 September 2012. The statutory no negative equity guarantee means the most you or your estate can be required to repay is the net proceeds of selling the property. If the debt has grown beyond the home's value, the shortfall is the lender's, not your family's.
Is the Home Equity Access Scheme better than a reverse mortgage?
For most people who qualify, it is cheaper, because the interest rate has been set well below commercial reverse mortgage rates and the same compounding applies to a much smaller rate. The limits on how much you can draw are the main constraint. Price both before deciding, and check the current rate directly with the government rather than relying on a summary.
What does a reverse mortgage do to my children's inheritance?
It reduces it by the debt, which grows faster than most people expect. In our example a $100,000 draw becomes $356,265 owing after 15 years. Whether equity still grows depends on house price growth, which is not guaranteed. Have the conversation with your family before you sign, not afterwards.
Talk to GNT Finance
Equity release is a decision worth taking slowly. Gorakh Timilsina will run the projections at realistic growth assumptions, compare the government scheme and the cheaper alternatives, and tell you plainly if a reverse mortgage is not the right answer. Our reverse mortgage page covers the product in full.
Book a free consultation or call 0426 403 703.
This page is general information only and not legal, tax or financial advice. Laws change — confirm current rules with the State Revenue Office, the ATO or a licensed professional.
Written by Gorakh Timilsina
Founder, CEO & Senior Mortgage Consultant at GNT Finance. Gorakh started as a broker assistant, spent years as a senior credit officer assessing loan applications, and now helps Melbourne families get the right loan approved. English, Nepali and Hindi spoken.