How to Use Reverse Mortgage Calculators
By using reverse mortgage calculators. Senior citizens thinking of getting a reverse mortgage loan can have an idea what rate they can get by using the right reverse loan mortgage rate calculator.
There are many such tools using different reverse mortgage calculation techniques which are available online. The estimates will vary but they must not be taken as a proposal or a guarantee that your application will be granted if you decide to apply. At best, it will help you decide if the option is worth taking.
Using a Reverse Mortgage Calculator
Whatever reverse mortgage loan calculator you choose, it will base its calculations according to four variables:
1. Reverse mortgage calculators will ask you to provide some personal information
The questions will dwell on 5 important facts:
- How old are you?
This is important to establish your eligibility-only homeowners above the age of 62 will qualify. It will also enable the lender behind the reverse loan mortgage rate calculator to make assumptions on the state of your health and longevity.
- How much is your home worth?
This is important because the reverse mortgage loan will be based on your home's equity. It will also show if your home's value is above the HECM program's limit of $625,000.
- How old is your spouse?
He or she could continue the loan after you so the lender is interested to know if she's in the position to do so.
- What is your ZIP code?
The information will help appraise your home value according to how your state is managing the recession.
- Do you have any existing mortgages at the time of your reverse mortgage application?
The information will have an effect on the calculation of your reverse mortgage loan proceeds.
2. The quoted figures will vary according to the prevailing interest rates
Rates may vary weekly or monthly and every decrease or increment will affect the estimated loan amount. You could use any reverse loan mortgage rate calculator on five different dates and get five different quotations.
3. The interest rates can either be adjustable or fixed
Your federally-insured reverse mortgages or HECM's (Home Equity Conversion Mortgages) will reflect calculations based on your choice between an interest rate that is adjusted monthly or a fixed rate that remains unchanged for a year. Each plan will provide a different figure.
4. The loan proceeds will be available in different payout options
If you choose an adjustable interest rate, you can avail of the loan in four different ways:
- a single lump sum advance,
- a credit line account that grows larger each year according to the prevailing rates and allows you to withdraw money anytime,
- a fixed monthly amount for the rest of your life, or
- any combination of the three.
If, on the other hand, you opt for a fixed interest rate, you can get the loan proceeds in a single lump sum.
5. Origination, service, and closing fees will be computed based on the maximum allowable rates, all of which will be charged to the actual loan amount at closing.
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At the end of the day, any results from using mortgage calculators are ballpark figures which could serve as a reference point for making a future decision on a reverse mortgage loan proposal. Still, the amount can be a temptation for retirees who may decide to go for that lifelong dream purchase which is now within their fingertips.
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