ARLO™ is the only calculator of its kind to offer you instant and accurate eligibility across 2020’s best HECM, Jumbo & Proprietary reverse mortgages.
ARLO™ will instantly generate a quote that includes your available loan amount and current interest rates. Best of all, ARLO™ will retrieve the most suitable program for your individual needs.
Using ARLO™ Calculator
The amount of funds available from the reverse mortgage are based on several factors which include the age of the youngest borrower or spouse, current interest rates, and your home’s property value.
Step 1. Enter your property zip code, estimated value and any mortgage balances
Your zip code is important as ARLO™ will fetch accurate 3rd party closing costs such as title, recording and local taxes (if applicable). If you are unsure about your estimated home value, we will be happy to return a list of recent sales comparable an appraiser will likely use in their property estimate.
Step 2. Enter your age
Your principal limit is based on the youngest borrowers exact age. This step only assures your calculations are returned as accurate as possible.
Step 3. View Your Analysis
Within the results you will be welcomed by ARLO™ with special program recommendations based on your individual goals. You can adjust the amount of funds you would like to withdraw at closing and view amortization schedules across all available plans.
ARLO™ can also show you which program is best overtime, and which carry the least initial setup costs!
- Don’t forget to include your spouse’s age, even if they are not yet 62 as loan proceeds are always based on the age of the youngest spouse.
- When you close a reverse mortgage within 6 months of your next birthday, your calculations automatically move you into the next year’s principal limit factor.
- If you have a HELOC (Home Equity Line of Credit), be sure to include this balance as part of the total mortgage payoff.
What’s Included in Your Quote?
- Side-by-side loan comparisons
- Real-time interest rates + APR
- Estimate of closing costs
- Amortization Schedules
- Personalized Program Recommendations
Results will display all programs for which you are eligible including real-time interest rates and custom amortization schedules. Using our loan estimator (ARLO™) will make your life easier by highlighting each program along with personalized program recommendations.
How the Reverse Mortgage Calculator Works
What percentage of home equity is required for a reverse mortgage?
The percentage of your home’s equity that is available to an individual for a reverse mortgage depends on several factors. HUD uses a HECM calculator to determine benefits for each borrower that takes into consideration the ages of the borrowers, the interest rates at the time the loan is originated as well as the value of the home or the HUD lending limit whichever is less.
Since borrowers can stay in their homes for life and never have to make a payment on the loan, the calculator takes all these factors into consideration to determine the amount the borrower will receive in their Principal Limit, or maximum available loan amount.
In short, it is very difficult to publish Percentages or “Loan to Values” that are available simply because they change as the factors change. Older borrowers receive more money than do younger borrowers since with a shorter life expectancy, they are not liable to remain in the home as long and accrue as much interest on the home.
Interest Rates & Lending Limits
With today’s interest rates, borrower receive more money because they do not accrue interest as rapidly. Borrowers with homes that have values that exceed the maximum HUD lending limit (currently $765,600) receive less money as a percentage of their property value than those who are below that value simply because additional benefits cease to accumulate once the value rises above the $765,600 maximum.
Simply put, a borrower with all the same factors (age costs, etc.) owning a home valued at $765,600 will receive the same benefits as a borrower with a home valued at $825,000.
This would mean that the percentage of one’s home value is higher than the other, even though the dollars are the same and for homes up to $1,000,000, the HUD program is usually still the best option in most cases. If your home is valued well above the HECM limit, you may benefit more from a jumbo or proprietary program.
Finally, borrowers are not “required” to have any amount of equity in their homes to obtain a reverse mortgage. Many times, borrowers have decided to bring additional funds to close a reverse mortgage in to escrow when their existing liens exceeded the amount of the new reverse mortgage they would receive.
They did not have enough equity in the home for the reverse mortgage to pay off their existing liens but chose to use other funds to eliminate their current mortgage anyway and this is allowed.
If your home is valued above the HUD maximum limits, the HECM program may still or may not be the best program for you and the calculator will show you how you fare under each program.
What is the principal limit / loan amount you can borrow on a reverse mortgage?
The principal limit or loan amount you can receive as stated above is dependent on several factors. Borrowers ages, interest rates, property values or HUD lending limit whichever is less on the HUD Home Equity Conversion Mortgage (HECM) and these items as well on the jumbo programs but then the program parameters instead of the HUD lending limits on the jumbo or proprietary programs.
How is the line of credit growth rate calculated?
The credit line growth rate is based on the unused portion of the line of credit. For any funds remaining in the line of credit, the line grows at a rate equal to the interest and mortgage insurance premium (MIP) that would be accruing on those remaining funds for as long as they remain unused.
Growth Rate Example:
E.g., if your interest rate is 4.5% and the MIP is .5% the total interest and MIP that would accrue on the funds is 5%. If you have $50,000 left on the line that you did not use and therefore did not accrue that 5%, that $2,500 (5% of $50,000) is then added to the line of credit and is available to you in an increased line amount. The next year you would have $52,500 available.
If the funds were not used in the following year, the growth would be computed on the balance or $52,500. Any funds borrowed would no longer be included in the growth calculation.
You must remember that the funds only grow on the unused portion of the line. There is no growth on funds already used as they are accruing interest, so they do not result in an increase in the amount available to borrowers. The growth is not interest borrowers are earning. This is not a bank account where you have money sitting and were you are accruing interest.
It is an increase in your line and if you borrow those funds, you or your heirs owe those funds when the loan becomes due. If you decide never to borrow them, there are no funds available to heirs, but you and your estate do not owe them either. The equity remains in the home for you or your estate if you do not borrow the money.
How is the tenure payout calculated?
The tenure payment is a calculation that uses the benefit the borrower(s) receive based on the Principal Limit discussed above. The calculation takes that benefit amount and then uses the borrower(s)’ age(s) to determine the number of years the benefit must continue and assumes the credit line growth rate based on the known factors.
It then calculates a payment based on the known and assumed factors to determine the monthly payment that the borrower(s) would receive for life using the growth the line will receive on the falling balance.
How is the lump sum calculated?
The lump sum is calculated based on whether the loan is being used to purchase a home or the amount the borrowers owe on current mortgages and liens for all programs, but then future funds availability will depend on the program you choose and how much of your Principal Limit you use on the lump sum payment.
All programs can take up to 100% of their Principal Limit in a lump sum if the funds are needed to purchase a home or to pay off existing loans. If the loan is not being used to purchase or pay off existing loans, then there can be a limit on the initial draw.
Prior to a change in 2014, the lump Sum was exactly that, a lump sum of the entire Principal Limit for which the borrower qualified under the program. The lump sum of the entire Principal Limit was an option the borrower received for the fixed rate loan or could be an election the borrower took under the adjustable line of credit.
Borrowers wanting a fixed rate loan are required to take a lump sum draw as there are no subsequent draws allowed under the fixed rate program whereas borrowers who opt for the line of credit can receive multiple draws under the program.
HECM Lump Sum Restrictions
However, with the recent HUD changes, the amounts available to borrowers at closing are different under different circumstances which tend to adversely affect the fixed rate borrowers.
Borrowers who now want a lump sum to draw but do not need all the funds to pay off existing loans lose a portion of the loan for which they qualified on refinance transactions (purchase borrowers can receive a full draw at closing).
HUD calculates the funds available for a lump sum payment to borrowers at closing or in the first 12 months based on two criteria. Firstly, HUD allows the full lump sum to be used when purchasing a home.
When refinancing a home that you already own, HUD has allowed borrowers to take up to 100% of their Principal Limit to pay their existing loans or their “mandatory obligations” plus 10% of the line amount. HUD defines mandatory obligations as amounts which include valid liens and mortgages and costs to obtain the loan.
If borrowers do not need all funds to pay off their current loans/liens and costs (mandatory obligations), then HUD limits the amount the borrower can receive at closing or in the first year at the greater of 60% of the borrower’s Principal Limit or the total mandatory obligations plus 10% of the line.
The additional 10% above mandatory obligations are so that borrowers can pay off all their loans and then if they still have funds available, they can have up to 10% of their Principal Limit in cash available to them at closing.
This means that for fixed rate loans, if you are limited to any amount less than 100% of your loan at the close as your lump sum draw, you will forfeit the remaining amount of the Principal Limit that was not available to you at closing.
As there are no further draws available on the fixed rate loan programs, any amounts that HUD restricts in the lump sum payment are forfeited by borrowers and are not subject to be drawn later.
They are not borrowed and are not required to be repaid, but if you decide you do need them later, you would not have access to them.
Borrowers choosing the adjustable rate line of credit who are not allowed to take their full Principal Limit in their lump sum draw at closing due to this restriction can wait for 12 months or any time thereafter and then can draw the remaining funds if they so choose.
Other Helpful Calculators:
- Reverse Mortgage Amortization Calculator – Includes free excel file download to run payment plans (Tenure, Term, LOC)
- Reverse Mortgage Line of Credit Growth Rate Calculator – Estimates credit line growth with future growth rate simulator.
- Reverse Mortgage Purchase Calculator (H4P) – Estimates down payment & loan terms for a new home purchase.
- Reverse Mortgage Refinance Calculator (H2H) – Access this calculator to estimate a refinance of your existing loan.
- No Disclosure Calculator – Use this calculator if you’d prefer not to include any personal information for a basic quote.