National Consumer Credit Protection Act 2009

For the purposes of this Code, an arrangement is a reverse mortgage if the arrangement involves a credit contract, except a bridging finance contract, and a mortgage over a dwelling or land securing a debtor’s obligations under the contract and either:

the conditions in subsections (2) and (3) are met; or

the arrangement is of a kind declared by ASIC under subsection (4) and is made on or after the commencement of that declaration.

The first condition is that the debtor’s total liability under the credit contract or mortgage may exceed (to a limited or unlimited extent) the maximum amount of credit that may be provided under the contract without the debtor being obliged to reduce that liability to or below that maximum amount.

The debtor’s total liability can exceed the maximum amount of credit because interest and some other fees and charges are not included in an amount of credit: see subsection 3(2).

The second condition is that, if the regulations prescribe any prerequisites for the arrangement to be a reverse mortgage, those prerequisites are met.

ASIC may by legislative instrument declare specified kinds of arrangements involving a credit contract and a mortgage over a dwelling or land securing a debtor’s obligations under the contract to be reverse mortgages.