The Internet is a good place for consumers to find out more about products they’re interested in. But it’s important to be selective when researching on financial products, and seek advice of 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, either through a fixed or adjustable rate loan, or through the home equity conversion mortgage (HECM) Standard or Saver programs, both of which are insured by the Federal Housing Administration, but which come along with different fees and expected loan amounts.
They also 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. 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. AARP’s calculator
This calculator from the trusted senior advocacy organization is fairly simple: consumers enter their zip code, date of birth, the co-owner or spouse’s birth date, and their home’s value.
The calculator then determines how much of the consumer’s home equity can be borrowed against, and breaks it down into three ways a borrower could choose to access their equity: through a HECM Standard fixed rate, where an interest rate is locked in and remains constant throughout the term of the loan; a HECM Standard LIBOR (or adjustable rate); or a HECM Saver LIBOR.
From there, the calculator also details how much money a borrower would be able to receive through choosing a lump sum option, monthly payments, or through a line of credit.
2. All Reverse Mortgage Company’s calculator
This calculator is an example of those hosted on reverse mortgage lenders’ websites, and it’s a little more detailed than AARP’s. 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.
With that information, the tool provides five different options of what the loan would look like as: a HECM Saver lump sum at two different rates; a HECM Standard lump sum at a certain rate; a line of credit plus a monthly payment plan with a HECM Saver; and a line of credit plus a monthly payment plan for a HECM Standard.
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 an amortization table going up to 20 years. Prospective borrowers can choose the loan option they’re most interested in before submitting their information and sending a quote to All Reverse Mortgage Company.
3. HECM vs. HELOC (home equity line of credit) calculator (third-party)
This third-party tool allows consumers to compare between a HECM reverse mortgage and a home equity line of credit. The fields are more complex, and it may help for the prospective borrower to have done some prior research into both loan options before using this calculator.
Information needed includes home value, outstanding mortgage balance, available equity, projected home appreciation percentage, monthly draw for living expenses, projected loan term (in number of months), and inflation adjustment percentage.
Then, it has two side-by-side forms for the HECM to HELOC comparison. For the HELOC, a consumer is prompted to enter a loan-to-value ratio (LTV), available loan amount, what closing costs would be, and the yearly interest rate.
For the HECM, consumers are asked the available loan amount, the closing costs, the effective loan rate (as a yearly percentage), and the letter of credit growth rate (also as a yearly percentage).
The calculator then prepares an amortization table that breaks down how the loans would compare for the length of time the borrower expects to have it. It calculates how much interest would be paid during the lifetime of each type of loan, the remaining home equity at the end of the estimated loan period, and the remaining letter of credit at the end of the period.
4. The Reverse Mortgage Advisor (third-party) calculator
This calculator is an example of a third-party tool that takes a consumer’s information and sends it on to a reverse mortgage lender or broker for follow up. A phone number and email address are required in order to receive an estimate.
In addition to contact information, the calculator asks for the consumer’s age, name, address, home value and loan balance. If prospective borrowers’ loan-to-value (LTV) ratio is less than 61%, they “may qualify” for a loan, and if it’s above 61%, then they “may not” qualify, but can call a number to speak with someone or look into refinancing options.
Those who may be eligible for a reverse mortgage can click through to a more detailed—but still free—calculator that outlines the different loan options. By providing contact information, the potential borrower may be open to a phone call or email from a reverse mortgage broker or lender.
Another type of reverse mortgage calculator is for home purchase. Estimate your down payment requirements with our HECM for Purchase Calculator