Reverse Mortgage Calculator FAQ’s
How to fill out the reverse mortgage calculator?
- You can use our free reverse mortgage calculator to determine the amount of loan proceeds available to you. Just tell us a bit about yourself and your property.
- Age: Indicate your age. Only individuals Age 62 plus, are eligible for a reverse mortgage loan. If you have a spouse who is under Age 62 ask us about the new exception that allows a spouse or co-owner to be under age 62, as long as one borrower is at least age 62.
- Home Value: Tell us “roughly” how much your home is worth. If you haven’t had your home appraised recently, just provide your best guess. You can also put in your address to get an estimate from Zillow.com.
How does the free Reverse Mortgage Calculator work?
- By filling in the indicated fields, our free reverse mortgage calculator will give you a very good idea whether or not you qualify for a reverse mortgage and how much of your equity, in the form of loan proceeds, you may be able to access. After we speak on the phone, we can tighten up the numbers and upgrade you from an “estimate,” to a more precise customized complimentary “loan summary”.
- We look forward to serving you and making this a simple process where there are no surprises and you achieve The GoodLife in Retirement. Knowing how much to expect from your reverse mortgage can help you better prepare for the future so you can live The GoodLife in Retirement. It’s our pleasure to serve you and help determine if this is the right loan, at the right time, for the right reason. We love to educate seniors about reverse mortgages and help them determine the best way to leverage their home equity to improve their lives.
What percentage of home equity is required for a reverse mortgage?
- Although there are no specified dollar limits, the optimal candidate for a reverse mortgage is someone who has a significant amount of equity in their home. Typically, an individual will want to have more than 50% equity in order to pay off the existing mortgage because if there is a large outstanding mortgage balance, the result would be minimal cash out. This is because if an individual has a traditional mortgage, the reverse mortgage will pay that mortgage balance first and the remainder from what is available to the borrower. The percentage of equity an individual can take out is dependent on several factors, including their age, the home’s fair market value, and the interest rate of the loan. Normally, the older an individual is and the more their home appraises for, the more equity they can take out.
How is reverse mortgage interest calculated?
- Interest rates are calculated differently for fixed interest rates and variable interest rates. Fixed interest rates are determined at the time the loan is initiated and remain fixed for the life of the loan. Variable interest rates are composed of 2 values: the index and the margin. The index is a standard rate that fluctuates with the market interest rates. The margin is the amount added to the index to arrive at the interest rate applied to the loan. The margin is determined at loan origination and remains the same for the life of the loan.
What are the costs associated with a reverse mortgage?
- There are several different costs that are factored into a reverse mortgage. Reverse mortgages must take into account several upfront costs that include the origination fee, the initial mortgage insurance premium, the appraisal fee, and closing costs. Closing costs are commonly charged to the borrower and include the credit report fee, flood certification fee, escrow closing fee, document preparation fees, recording fees, courier fees, title insurance, pest inspection, and surveys.
Reverse Mortgage Calculator Glossary Terms
Reverse mortgage line of credit growth
- Reverse mortgage line of credit growth occurs when available money in the credit line increases over time based on the annual growth rate. The reverse mortgage line of credit growth rate is the annual rate at which the variable-rate HECM credit line increases. The annual growth rate is the sum of the interest rate plus the annual mortgage insurance premium (MIP) rate.
Reverse mortgage tenure payment
- A tenure payment plan is one way in which individuals can use funds from a reverse mortgage. It is a monthly payment they will receive for as long as they live in their home as a primary residence. With that, the tenure payment plan comes with an adjustable interest rate and accrues interest on monthly proceeds as they are distributed. Interest also accrues on any financed closing costs which combined with monthly tenure payments with interest and MIP make up the balance the borrower owes when the reverse mortgage is due.
- The borrower’s monthly payments under the tenure plan are calculated as if the individual will live to be 100 years old. The reverse mortgage loan proceeds are then divided into equal monthly disbursements given that assumption.
Reverse mortgage lump sum
- A reverse mortgage lump sum is when an individual receives their proceeds in a large tax-free cash payout when the loan closes. No payments are required on the reverse mortgage as long as one borrower (or non-borrowing spouse) is living in the home and is paying the required property charges. While a lump sum can come with both an adjustable and fixed interest rate, the fixed interest rate is exclusive to the lump sum payout.
- Reverse mortgage lump sum distribution is dependent on if it is a fixed rate or variable rate HECM. In a fixed rate HECM, if the mandatory obligations exceed 60% of the principle limit, an individual receives up to an additional 10% of the principle limit (not to exceed the principle limit). If the mandatory obligations do not exceed 60%, an individual will receive a lump sum for the difference between the mandatory obligations and 60% of the principle limit.
Reverse mortgage loan origination fee
- The lender charges the origination fee which is directly impacted by the appraised value of the home. Lenders can charge the greater of $2,500 or 2% of the first $200,000 of a home’s value in addition to 1% of the amount over $200,000. With that, there is a cap at $6,000 regardless of the home’s appraised value.