It is difficult if not impossible to calculate, at the time of taking out a reverse mortgage, the total amount that will be due at the end of the term. This final sum is dependent upon several unknowable factors, including future fluctuations in interest rates and home values. Even the term of the loan cannot be determined, as it depends upon the long-term health and housing requirements of the borrower.

For this reason, one should preserve that nest egg even while accessing it, and there are means of doing so.

Prior to seeking a reverse mortgage, it’s important to remember that the borrower’s desires are in direct opposition to those of the lender. The higher the amount of the loan sold, the greater the bank’s profits, and often the higher commission paid to the customer service representative, whereas it’s to the borrowers’ benefit to withdraw as small an amount as will fulfill the current financial requirements.

Therefore it’s important to budget in advance. Prospective borrowers should have a sum firmly in mind, and not allow a sales pitch to talk them into a higher one. Remember, it’s always possible to redraw from the loan and remove more equity should the original sum not suffice, but it’s rather more difficult to put the money back where it came from after it’s been spent.

A second means of protecting that equity nest egg is to withdraw the money as a steady stream of income rather than a large lump sum, if at all feasible, even if the funds are to be deposited into an interest-bearing account.

The reasons for this are three-fold: Firstly, the amount of interest earned, even from a high-interest online savings account, is not likely to equal the amount charged through the reverse mortgage. Secondly, larger drawdowns are more likely to affect one’s Centrelink benefits. Thirdly, interest is charged only on funds that are actually drawn down; as the interest so accrued is added into the principal of the loan and accrues interest in its own turn (compound interest), accumulating rather quickly, it’s obvious that the less interest earned, the more equity will be protected.

For the same reason, one should shop around for the lowest interest rate, and the lowest charges and fees, including redraw fees and house re-evaluation charges. Some banks add these charges and fees into the loan principal, others withdraw them from the amounts paid out, however, both bite into that equity nest egg, leaving less for one’s own needs.

Shopping around, of course, takes only a few minutes on the Internet. Particularly useful are loan brokerage websites, which often gather all the data on the offers of various lenders into one spot for easy perusal, making it simpler to locate the reverse mortgage that will allow a comfortable retirement through one’s home equity without eroding it entirely.