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Understanding and Using a Reverse Mortgage Calculator

reverse mortgage calculator

If you are considering a reverse mortgage, you should take advantage of a reverse mortgage calculator before you make any decisions.

With the many different types of mortgages available to consumers today, a reverse mortgage is not one of the more particularly well known mortgages. In recent years; however, the reverse mortgage has become increasingly popular, especially among senior citizens.

While a reverse mortgage, and the data provided by a reverse mortgage calculator, can sound advantageous at first, it’s important to understand the basics regarding this type of mortgage.

Reverse mortgages are normally marketed toward senior citizens who are concerned with the rising cost of prescription and other medical care costs and who rely on limited supplemental income to fund these expenses. In this regard, a reverse mortgage is typically marketed as being able to provide needed funding to senior citizens who live on a limited fixed income.

What is a Reverse Mortgage?
Before we get into finding out how much money you can receive by using a reverse mortgage calculator, it’s important to understand a few basic facts about reverse mortgage offers.

1) Only individuals who are at least 62 years of age are eligible to qualify for a reverse mortgage loan.
2) In addition, individuals who apply for a reverse mortgage must be the principal residents of the home they seek to put the mortgage on. In most cases, that home must be a regular residential dwelling-it can’t be an apartment complex or duplex.
3) Finally, if there is more than one homeowner; both individuals are required to apply and sign the reverse mortgage agreement.

In addition; you must understand that you are still a homeowner when you take out the reverse mortgage. This means that you will still be responsible for expenses such as property taxes and homeowner’s insurance as well as necessary repairs that must be made to the home.

How a Reverse Mortgage Works
Now that the basics have been discussed, let’s look at how a reverse mortgage works, what a reverse mortgage calculator can tell you and why a reverse mortgage might not be beneficial.

First, the way a reverse mortgage basically works is that the homeowner(s) are allowed to take out a mortgage on their home and be able to receive the proceeds of that mortgage without having to pay them back until one of the following situations occurs:

1.The homeowner(s) die
2.The homeowner(s) move
3.The homeowner(s) move and sell their home.

The Disadvantages
The biggest downfall in a reverse mortgage lies in the fact that due to the unpredictability of these circumstances, it can be hard to determine how much interest will accrue in total on the mortgage.
You see, throughout the length of the mortgage; ever how long that may be, interest will be accruing on the mortgage.

For example, if a homeowner takes out a reverse mortgage loan at the age of 62 and keeps it until he or she dies at the age of 82, there will be 20 years worth of interest accrued on that loan. When the loan becomes due (upon the death of the homeowner in this case) the interest, as well as the total amount of the loan, must be repaid.

As you can see, this would present a terrible set of circumstances for the survivors of the homeowner. Unless the homeowner made provisions for the interest to be paid from the proceeds of some type of life insurance or other finances, the survivors would be responsible for somehow coming up with the interest owed on the loan.

Despite the fact that reverse mortgage offers contain a number of disadvantages for senior citizens, they continue to grow in popularity due to the easy availability of cash that many seniors need to subsidize their daily living expenses.

So, how much money can you access through a reverse mortgage loan?
That amount primarily depends on your age at the time of the loan and the value of your home.

Generally speaking, the older you are and the more your home is worth; the more money you will be able to obtain through a reverse mortgage loan. 

To use a Reverse Mortgage Calculator; you’ll first need to input certain data: 

  • Your birth date
  • The birth date of your spouse of co-borrower (if applicable)
  •  How much your home is worth
  • Your zip code
  • The amount of any mortgages or liens on your home
  • Monthly payments on any existing mortgages on the home
  • Any other up front cash you may desire
  • Amount of any necessary repairs
  • Amount of your desired credit line

One thing you should be aware of is the fact that a reverse mortgage calculator will generally tell you the payback amount on the loan.

Normally, it will simply tell you how much money you may be able to receive under a variety of situations, such as: 

  • Amount of a single lump sum advance
  • Amount of a credit line
  • Amount the credit line will reach, if unused within a period of years
  • The amount of the monthly loan advance for the period of time that you live in your home.