Reverse mortgage calculation

Reverse mortgage calculation can be a tricky thing for mortgage applications. […]

Reverse mortgage calculation

Posted on: June 06, 2021

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Reverse mortgage calculation can be a tricky thing for mortgage applications. So if you want to have an idea of how much your reverse mortgage will cost, a reverse mortgage calculator will come in handy. How does a reverse mortgage calculator work? It is quite simple, really. When you go online and look for a reverse mortgage calculator, it will ask you to put in basic information like the following:
  • Age
  • Home value
  • Years you expect to occupy the home
  • Mortgage insurance rate
  • Age of the youngest borrower 
  • Age of non-borrowing spouse
  • Interest rate expected
  • Closing costs estimate
So, what do the terms above mean? What are you supposed to encode in the reverse mortgage calculator? Here are some of the definition of the terms:
  • Years you expect to occupy the home - the shorter the loan term, the higher the payment. If you hope to stay there until the very end, they will base your monthly amortization on your age and life expectancy.
  • Closing costs estimate - this includes the mortgage insurance, third-party fees, and origination charges.
  • Mortgage insurance rate - there are different premiums, especially if you are enrolled in a private program, but for HECM, it is currently at 1.25%. Talk to your mortgage originator for the most recent rates.
  • Age of the youngest borrower - remember that as this is a reverse mortgage, the youngest possible age is 62 years old. When it comes to the age of non-borrowing spouses, they cannot be considered as HECM borrowers if they are not at least 62 years old. If they live in the home, the originator will help you figure out the maximum loan amount in this case.
The good thing about online reverse mortgage calculators is that it is free and you can keep on changing the figures, depending on your situation. But of course, if you have a complicated mortgage situation, you can always talk to a servicer to get a clearer picture.      

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