Tips for Using a Reverse Mortgage Calculator

Although reverse mortgage calculators are not new they have only recently gained popularity due in part the cost of retirement.

Reverse mortgage calculators are available specifically for those in retirement age from 62 years up.  In extremely simple terms what is does is it takes the equity out of a home and pays it out to the retiree.  The terms are either one lump sum, in a monthly payment or in terms of a home equity line of credit.  None of the money needs to be paid back until either the home is either sold or vacated by the owner.

The monies paid are able to provide an additional income allowing them to continue living in their home for an indefinite period of time.  However this type of mortgage loan is complex and it is necessary for those contemplating it to be fully aware of the terms involved.

The Advantages of Reverse Mortgage Calculators

Firstly they require no monthly repayment which prevents any possibly of foreclosure due to non-payment.  A very big advantage is that the applicant is not required to meet an “income to debt” ratio in order to qualify.  Once a home is being paid off the equity on it continues to rise in accordance to market values.  It is this equity that can be withdrawn on a reverse mortgage calculator.  In simpler terms is the difference between the mortgage still owed and what the home is valued at - the market share value.  The procedure is reversed; the lender pays you instead of you paying them.

Restrictions

This type of loan is only available for those over the age of 62.  In many cases lenders dictate that the home should be either fully paid off or have very little owing on the remaining mortgage.  The owner must also be in residence in the property.

The type of home is also taken into account in order to qualify.  Those eligible consist of single family homes, detached homes, townhouses, condominiums or 2-4 unit premises that are occupied by the owner.

The amount of money available is influences by various factors.  The first is the currently market value of the home – the higher its value, the higher the amount available for borrowing.  Interest rates have an impact too.  The lower the interest rate the higher the amount that can be borrowed.  The last factor is age, the older the applicant the higher the loan.

However this type of loan is not meant for luxuries and should not be undertaken lightly as the fees involved in this type of loan may be very high.  Instead it is a loan that is available for those who do have access to any other alternatives.  It is designed specifically so that a homeowner may remain in their home and cover their monthly necessities and expenses.

Steps Involved in Applying

The first step in attaining a reverse mortgage is the reserve calculator.  What this does is compute the estimated amount the applicant may be eligible to borrow.  The process is actually fairly simple and requires only a few personal details upfront, such as:

Birth date of applicant

Spouse’s birthdate, if married

Estimated value of the property

The amount still owing on the property

Zip code

The calculator will then be able to estimate the amount of money the applicant is eligible for and provide a list of several loan programs the applicant can choose from.

Each estimate shown by each loan program will differ slightly due to different interest rates or margins.  The applicant will also be given the option of a fixed rate mortgage loan or an adjustable mortgage loan.  Each option is affected or dictated to by interest rates.

Fixed rate mortgage loan pays less money and requires the borrower take 100% of the loan from day one.

An adjustable mortgage loan pays more and pays the borrower out in three different ways.  Either as a monthly payment, as a lump sum or as a line of credit.  It costs less, provides more flexibility and offers better long tem benefits.

A reverse mortgage calculator is merely a tool that provides an estimation of the amount an applicant qualifies for.  The next step would be to contact the lender who will be able to provide a customized summary.  This summary will be more comprehensive as it contains a breakdown of fees as well as am payback schedule.

The payback schedule will be able to predict what the loan balance should be when compared to the value of a home in later years.  This enables the applicant to make an informed decision based on the possible impacts this type of loan will have on their estate over the long term.

The value of a reverse mortgage calculator is that is provides the lender an instant view into whether or not they have enough equity to qualify , whether the figures provided would suit their long term situation and whether or not  they should take it to the next level and request a full summary.