THE REAL ISSUE BEHIND REVERSE MORTGAGES

According to a review by the watchdog ASIC, seniors don’t always understand the long-term impact of a reverse mortgage on their home equity. As a guide, a 60-year-old borrowing $118,000 (the average reverse mortgage) at 6.3% could owe $392,000 by age 80. If rates rose by just 2% the debt could increase to $550,000. However, the big unknown is how much your home’s value will rise. The MoneySmart website features a reverse mortgage calculator that lets you play around with the numbers to gauge the likely impact in different scenarios.