The Internet is a great tool for consumers to research the many lending products available.
But it is important to be selective when researching financial products and seek advice from a trusted resource. Reverse mortgages are no exception.
Many websites offer “free reverse mortgage calculators” that allow consumers to enter home and personal information and calculate whether they’re eligible for a loan, and if so, how much of their home’s equity they’d be able to access.
Some reverse mortgage calculators also detail the different ways consumers can tap into their home equity.
For most borrowers, this means considering either a fixed or adjustable rate forward or conventional loan or using the home equity conversion mortgage (HECM) reverse mortgage which is insured by the Federal Housing Administration.
For some, it might also mean considering one of the private/proprietary or jumbo reverse mortgage programs if the individual lives in a higher valued home and wishes for a reverse mortgage that will accommodate a larger loan amount than the government programs.
The calculators typically break down how much a borrower would get if they were to receive their reverse mortgage funds in lump sum, a monthly payment, or a line of credit.
Many lenders provide calculators on their websites, but some are hosted by third parties who may pass along information to lenders and some are more intrusive to borrowers about information requirements.
It’s important to use caution when these sites ask for your contact information if you do not want to receive any follow up information.
Here are several different reverse mortgage calculators that can help you decide if a reverse mortgage is the right option for you.
1. National Reverse Mortgage Lenders Association (NRMLA) Calculator
This calculator from the trusted lender ethics advocacy organization is simple: consumers enter their zip code, slide the bar to the youngest borrower’s age, add their home’s value.
The calculator then delivers a rough estimate for money available to the borrower(s) on an annual adjustable loan, a monthly adjustable loan, and a fixed rate option.
There are some minor changes you can make but the options are limited and the calculator is not supplied by a lender so it must assume rates and fees that may be higher or lower than those actually available.
This makes it a good place to start, but you may not get a true picture of what is available to you for your circumstances.
2. ARLO™ Reverse Mortgage Calculator
Consumers are asked to enter their zip code, mortgage balance (if any), home value, name, and date of birth for themselves and any co-owners.
After you put your information into ARLO (All Reverse Loan Optimizer), we will both send and display several options that are tailored to your circumstances.
You may receive information for both the HUD HECM programs and the jumbo or private programs available if those are also advantageous for you based on your property value.
For each option, a consumer can check out loan details that break down finance fees for origination costs (which vary depending on the type and rate of the loan), and amortization schedules going up to 20 years.
Prospective borrowers can choose the loan option they are most interested in based on actual loan charges for their location.
If you are not interested, All Reverse will not aggressively contact you to try to “sell you” on a product in which you have determined is not right for you.
3. The Retirement Researcher (third-party) calculator
This calculator is completely generic and requires borrowers to input a lot of loan terms in addition to their specific age and property information.
It will also inform borrowers about HUD factors that determine the amounts that borrowers can receive before costs and other considerations.
It does not compute the costs or interest rates; the borrower must know these to use this calculator.
This calculator will allow borrowers to add parameters such as set aside amounts required for repairs or due to income or credit requirements, but it cannot tell you if you will need one or what the amount will be if that becomes necessary.
Again, the borrower would need to know that information to properly use this calculator.
This calculator cannot show you the costs of any particular lender so while it may help borrowers understand the basics of the programs, it will not help them shop for the loan and gives no information about programs other than the HUD HECM products.
How does a reverse mortgage calculator work?
A reverse mortgage calculator utilizes information specific to a borrower to determine how much they can receive from a reverse mortgage.
This includes the age of the youngest borrower or spouse, the estimated home value, the amount of existing lien(s) if any and the zip code location of the property.
It takes this data and combines it with current interest rate options to determine a Principal Limit figure which is the loan amount someone can receive based on these circumstances.
The interest rate can increase or decrease this figure depending on current market trends.
The lower the rate the higher the dollar amount that can be borrowed.
Further explanation can be found at my article on Forbes.com
How much money do you get from a reverse mortgage?
The amount of money a borrower receives from a reverse mortgage depends on 4 key factors.
Those factors are their age, home value, existing liens owed and current interest rates available.
The older someone is the higher percentage of value they can borrow.
Simultaneously interest rates also factor into this formula.
The lower rates are the higher the percentage is that you can receive.
How is reverse mortgage interest calculated?
A reverse mortgage loan does not require any monthly mortgage payment, so the interest is added to the outstanding loan balance monthly.
Interest only accumulates on the actual balance.
If a borrower has an available line of credit interest does not accrue on that amount.
While the loan program is designed in this matter, this does not prevent a borrower from making voluntary payments of any amount of interest if that is their choice.
What is the current interest rate for a reverse mortgage?
The interest rates for a reverse mortgage loan are subject to change on a routine basis just like a conventional loan.
As the market interest rates move up or down so will the rates for a reverse mortgage loan.
To obtain a current interest rate, a borrower would need to obtain a current quote from a reverse mortgage lender.
What is the downside to a reverse mortgage?
When you have a reverse mortgage loan the property must remain your primary residence.
This means that you cannot obtain a reverse mortgage loan on your home and then move out of it and rent it out unless you paid off the reverse mortgage in full with your own funds or refinancing to a conventional or (forward) mortgage.
Since a reverse mortgage does not require any monthly payments, this means your loan balance will increase over time.
If you decide to move and sell your home years after obtaining a reverse mortgage, there is the potential for there to be less equity in the home due to that increasing loan balance.
Summary: Which Calculator is Best?
All of these calculators can be useful.
We obviously believe that the All Reverse Loan Optimizer (ARLO) by All Reverse Mortgage, Inc. is the best for borrowers shopping for a reverse mortgage because it allows borrowers to receive real numbers in real time with accurate costs no matter where you live in the country.
You can modify your information so that the proposal you receive meets your needs and it comes with current rates and fees being offered by All Reverse Mortgage, Inc.
You never need to supply your social security number to receive your information and if you do not wish to be contacted, all you need to do is let us know and we will respect your wishes.
We will never hound you just because you visited our site but will always be ready to assist you if that is your desire.
Our calculator includes information for both the HUD Home Equity Conversion Mortgage (HECM) which is the government-insured reverse mortgage as well as the jumbo or private programs for homes with values that exceed the HUD maximums.
And unlike some companies, we will send you a written proposal so you can compare.
We will not give you just a partial list of costs to make things look better (some leave out HUD fees or title fees on their initial proposals) but with a full and complete list of every known cost so you can really compare.
We encourage you to shop around and compare and we believe you will see that not all lenders are the same, or their calculators.
If you are in the market for a reverse mortgage, please take a moment to stop by ARLO’s online calculator and see if the numbers look right for you.
Additional Calculators Courtesy of ARLO
- Amortization Calculator with Excel File – This calculator includes a free excel file download which you may run unlimited “what if” scenarios. E.g., change in future interest rates, change in appreciation rates etc.
- Line of Credit Growth Rate Estimator – This calculator estimates the line of credit growth rate illustrating compound growth with a personalized future withdraw simulator.
- HECM Purchase Calculator – This calculator estimates your down payment & loan terms for a new home purchase.
- HECM Refinance Calculator – Access this calculator to estimate a refinance of your existing loan.