ASIC provides guidelines for its reverse mortgage calculator
The Australian Securities and Investments Commission (ASIC) has released information on how credit licensees should be using its MoneySmart calculator to provide reverse mortgage equity projections to clients.
The use of the calculator falls under the requirements for responsible lending obligations under the ‘National Consumer Credit Protection Act 2009' and the ‘National Consumer Credit Protection Regulations 2010', and must be used before making a ‘preliminary or final assessment of unsuitability about a reverse mortgage'.
According to ASIC's Information Sheet 185, the calculator is designed to provide clients with a better understanding of the impact a reverse mortgage may have on the equity of their home by calculating how much their debt will increase over time.
It also calculates how changes in interest rates and house prices — both increases and decreases — could affect the equity in their home.
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