ARLO™ Reverse Mortgage Calculator
When you use our calculator, you’ll receive detailed results to help guide your decision on a reverse mortgage.
Here’s what you can expect:
- Comparative Loan Options: You’ll see a side-by-side comparison of today’s top loan options.
- Interest Rates and APRs: The calculator provides current interest rates and annual percentage rates (APR), so you know exactly what costs are involved.
- Closing Costs Estimate: You’ll get an accurate estimate of closing costs associated with reverse mortgages.
- Personalized Recommendations: Based on your input, the calculator will offer recommendations tailored to your specific situation, ensuring you get the best program advice.
Understanding the financial details of a reverse mortgage is important, and that’s why ARLO™ offers customized amortization schedules. These schedules will show how interest accumulates over time and how much equity you’ll likely retain over the life of the loan.
We aim to provide you with all the necessary information to make a well-informed choice about your reverse mortgage and ensure it meets your personal needs and retirement goals.
Step 1: Enter Your Property Details
To begin, you’ll need to input your property’s zip code, estimated value, and any outstanding mortgage balances. If you’re unsure about your home’s appraised value, we can provide a list of recent sales that an appraiser would likely consider for comparison in estimating your property’s value. Your zip code is crucial because it allows ARLO™ to pull in accurate third-party closing costs, such as title fees, recording fees, and local taxes (if applicable) for your area.
The closing costs associated with a reverse mortgage can vary widely depending on where your property is located. These costs might include fees for the title search, appraisals, and state and county fees, among others. Providing your zip code is essential for the reverse mortgage calculator to accurately calculate the closing costs you might face in your locality.
Some lenders might not disclose all potential closing costs in their initial quotes. It’s important to understand all the fees involved in a reverse mortgage upfront to avoid any surprises with additional charges later on. Always inquire with your lender about any fees not included in their initial estimate to ensure you have a complete picture of the costs associated with a reverse mortgage.
Step 2: Enter Your Age
Understandably, when looking into a reverse mortgage, you might be hesitant to share personal information, like your age. However, the age of the youngest borrower plays a crucial role in determining your principal limit. This information is essential to ensure the calculations are as accurate as possible.
For the sake of precision in the calculator’s results, it’s advised to input each borrower’s month and year of birth. This approach allows you to maintain privacy while providing the necessary details to calculate the loan amount accurately.
It’s important to note that the borrowers’ ages directly influence the loan amount you can qualify for with a reverse mortgage. Additionally, if you’re approaching an age milestone—turning a year older within six months of closing the loan—you might qualify for a higher loan amount, so including accurate age information can be beneficial.
Step 3: View Your Analysis
Once you’ve inputted all the required information, ARLO™ will present various reverse mortgage options for you to consider. It’s crucial to take your time to carefully review each option to determine which one aligns best with your needs and circumstances. Your loan officer is there to assist you by explaining the advantages and disadvantages of each option and addressing any questions or concerns you might have.
Remember, your loan officer’s role is to provide guidance and information, not to push you toward any specific program or option. Our goal is to equip you with the knowledge you need to make an informed decision that’s right for you. Therefore, thoroughly evaluate your choices, considering your unique financial situation and long-term goals, before deciding.
User Tips:
- Include Your Spouse’s Age: When using the reverse mortgage calculator, always enter your spouse’s age, even if they are younger than 62. The loan amount you receive is based on the younger spouse’s age, making this detail essential for precise calculation.
- Consider Your Upcoming Birthday: If you’re close to celebrating your birthday and it falls within six months, the calculator will automatically adjust you to the following year’s principal limit factor. This adjustment can affect the amount of loan you’re eligible for. Therefore, if your birthday is soon, waiting a few weeks to apply could result in a higher loan amount.
- Provide Comprehensive Information: For the most accurate and relevant outcomes, it’s crucial to input as much information as possible into the calculator. This includes any outstanding balances on a home equity line of credit (HELOC). Adding this information ensures the calculator considers all your financial obligations, offering a result that best fits your situation.
Calculator FAQs
How is the amount of a reverse mortgage determined?
A reverse mortgage calculator uses several critical factors to determine the loan amount: the borrower’s age, the home’s value (or the HUD lending limit if it’s lower), and current interest rates. The Department of Housing and Urban Development (HUD) provides a table called the Principal Limit Factors, which sets the loan-to-value ratio for each borrower based on the expected interest rate. This ratio is applied to the lower of the home’s value or the HUD lending limit to calculate the total loan amount available, known as the Principal Limit. This calculation process allows homeowners to estimate the amount they can receive from a reverse mortgage, facilitating informed financial decisions.
How do interest rates impact the calculation of a reverse mortgage?
Interest rates are crucial in determining the loan amount a borrower can receive from a reverse mortgage. The Department of Housing and Urban Development (HUD) sets a baseline interest rate called the “Floor rate,” currently at 3%. If the expected interest rate is at or below this floor, borrowers are eligible for the maximum possible loan amount based on their age and the value of their property, as per program guidelines. However, the potential loan amount decreases when the expected rate exceeds this floor. The reason is simple: higher interest rates above the floor rate reduce the available funds to the borrower. Thus, changes in interest rates can significantly affect the financial benefits a borrower might receive from a reverse mortgage.
How is the growth rate for a HECM line of credit calculated?
The growth rate for a Home Equity Conversion Mortgage (HECM) line of credit increases the available funds over time. It is calculated by adding the current interest rate to the mortgage insurance premium rate, which is currently 0.50%. This combined rate is recalculated each month based on the remaining unused balance. For instance, if you have $75,000 unused in your line of credit and the interest rate is 4%, the total growth rate would be 4.5%—the sum of the interest rate and the mortgage insurance rate. This means your line of credit would grow by $281.25 for that month, calculated by applying the annual growth rate of 4.5% to the $75,000 and dividing by 12. This mechanism increases your line of credit, providing more available funds over time.
How are monthly payments calculated on a reverse mortgage?
The calculation of monthly payments on a reverse mortgage depends on several factors: the total loan amount, the age and life expectancy of the youngest borrower, the current interest rate, and the length of the chosen payment plan. Borrowers can choose a “Tenure” plan for guaranteed monthly payments for life as long as they live in the home and keep the loan active. Alternatively, a “Term” plan specifies a set period, such as 15 years, after which no further payments will be made. Generally, the older the borrower, the higher the monthly payments. Conversely, longer payment periods result in smaller monthly amounts. To determine specific monthly payments, it’s advisable to consult with a lender who can perform detailed calculations based on individual circumstances.
How is the lump sum payment calculated for a reverse mortgage?
HUD guidelines determine the lump sum amount for a reverse mortgage. It includes covering all mandatory obligations like closing costs and existing debts against the property, plus an extra 10% of the Principal Limit or 60% of the Principal Limit—whichever is greater. For example, if a borrower’s Principal Limit is $100,000 with no liens and $7,000 in closing costs, they could receive a lump sum of $53,000 after calculating a starting loan balance of $60,000 (60% of the Principal Limit). If an outstanding mortgage is $75,000, the maximum starting loan balance would be $92,000. The availability of any funds beyond the initial amount depends on the loan type: a fixed-rate loan offers a one-time lump sum at closing, while an adjustable-rate loan places any excess into a line of credit, accessible after 12 months.
Guide to All Reverse Mortgage Calculators
| Type of Calculator | Purpose | Features | Rates/APR |
|---|---|---|---|
| All Reverse Mortgage Calculator | Detailed Calculations for Monthly Payments, Single Lump-Sum Disbursement, and Line of Credit Options | Calculation of What You Could Get from a Home Equity Conversion Mortgage (HECM) or Jumbo/Proprietary Reverse Mortgages | Yes |
| Free Reverse Mortgage Calculator | Basic Calculations for Estimating Monthly Payments, Single Lump-Sum Payouts, and Available Line of Credit | Quickly Estimate Your Reverse Mortgage Payout Without Personal Details. | No |
| Reverse Mortgage Line of Credit Calculator | Specialized Tool for Estimating HECM Line of Credit and Simulating Credit Line Growth Rates | Estimates Your Available Credit Line from a Reverse Mortgage and Projects Its Growth Over Time. | No |
| Reverse Mortgage Refinance Calculator | HECM to HECM Refinance Analysis | Assists in Evaluating Whether Refinancing Your Existing Reverse Mortgage is Advantageous, Considering Current Home Value, Interest Rates, and the 5x Benefit Rule. | No |
| Reverse Mortgage for Purchase Calculator | HECM for Purchase | Calculates the Funds Needed to Buy a New Home with a Reverse Mortgage, Taking into Account Your Down Payment and Net Income from the Sale of Your Current Home. | Yes |
| Reverse Mortgage Amortization Calculator | Loan Balance and Equity Simulator, Negative Amortization Schedules | Offers a Comprehensive Analysis of Loan Balance, Equity, and Accrued Interest Changes Throughout the Life of a Reverse Mortgage, Complete with an Excel File for Personal Tracking. | Yes |
Do you need assistance or have any questions about which calculator to use? Don't hesitate to reach out to us. Our expert team is just a phone call away at (800) 565-1722, ready to offer you tailored advice and support.
