Home Equity Conversion Mortgage (HECM)
Proprietary (Jumbo) Loan
Lump Sum
Monthly Payments (Tenure – based on life expectancy)
Monthly Payments (Term – fixed number of years)
Line of Credit
Combination
Estimated Net Proceeds
$0.00
Understanding Reverse Mortgages and How This Calculator Works
A reverse mortgage is a special type of home loan that allows homeowners, typically aged 62 and older, to convert a portion of their home equity into cash. Unlike a traditional mortgage, where you make monthly payments to the lender, a reverse mortgage allows you to receive payments from the lender. The loan is repaid when the homeowner sells the home, moves out permanently, or passes away.
Key Concepts:
Home Equity: The difference between your home's current market value and any outstanding mortgage balances.
Borrowing Limits: Reverse mortgages have limits on how much you can borrow. These limits are influenced by several factors, including the age of the youngest borrower, the home's appraised value, the expected interest rate, and the specific loan program (e.g., HECM vs. Proprietary).
Fees and Costs: Reverse mortgages involve upfront costs, including origination fees, mortgage insurance premiums (for HECM loans), appraisal fees, title insurance, and servicing fees. These costs reduce the net amount of cash you receive.
Interest Rates: The interest rate on a reverse mortgage can be fixed or variable, affecting the total amount owed over time.
Payout Options: Funds can be received as a lump sum, regular monthly payments, a line of credit, or a combination of these. The payout method impacts the amount of funds available initially and over time.
How the Calculator Estimates Proceeds:
This calculator provides an *estimation* of the potential proceeds from a reverse mortgage. The actual amount you can borrow is determined by a complex formula set by lenders and government regulations (for HECM loans). This calculator uses simplified logic to give you a general idea. The primary factors influencing the loan amount are:
Age of the Youngest Borrower: Older borrowers generally qualify for larger loan amounts as they are statistically expected to draw on the equity for a shorter period.
Home Value: The value of your home is a primary determinant of the maximum loan amount.
Interest Rate: Higher interest rates can sometimes reduce the amount you can borrow, as they increase the potential future loan balance.
Loan Program: HECM loans have specific borrowing limits based on an FHA-insured maximum mortgage amount, while proprietary loans may have different limits.
Important Note: The "Estimated Net Proceeds" shown by this calculator are a simplified approximation and do not account for all potential fees, closing costs, or specific lender underwriting requirements. For an accurate assessment, you must consult with a qualified reverse mortgage lender and undergo a full financial assessment.
Common Reverse Mortgage Use Cases:
Supplementing retirement income.
Paying for healthcare expenses.
Making home improvements.
Covering living expenses.
Eliminating existing mortgage payments.
Providing a financial cushion for emergencies.
function calculateReverseMortgage() {
var homeValue = parseFloat(document.getElementById("homeValue").value);
var borrowerAge = parseInt(document.getElementById("borrowerAge").value);
var interestRate = parseFloat(document.getElementById("interestRate").value) / 100; // Convert percentage to decimal
var loanType = document.getElementById("loanType").value;
var loanPayout = document.getElementById("loanPayout").value;
var resultDiv = document.getElementById("result");
var resultValue = document.getElementById("result-value");
var resultExplanation = document.getElementById("result-explanation");
// Basic validation
if (isNaN(homeValue) || isNaN(borrowerAge) || isNaN(interestRate) || homeValue <= 0 || borrowerAge < 62 || interestRate = 62 && borrowerAge = 65 && borrowerAge = 68 && borrowerAge = 71 && borrowerAge = 74 && borrowerAge = 77 && borrowerAge = 80 && borrowerAge = 83 && borrowerAge = 86) maximumLoanFactor = 0.80;
// Adjust MLF for interest rate (simplified negative correlation)
maximumLoanFactor -= (interestRate * 0.5); // Example adjustment
if (maximumLoanFactor 0.80) maximumLoanFactor = 0.80; // Maximum factor
// HECM principal limit is the lesser of the Maximum Loan Amount or the Home Value (after accounting for upfront MIP)
var principalLimit = homeValue * maximumLoanFactor;
// HECM upfront MIP is 2% of the maximum of the appraised value or the HECM FHA mortgage limit.
// For simplicity, we'll use 2% of home value as a proxy for estimating reduction.
var upfrontMIP = homeValue * 0.02;
estimatedLoanAmount = principalLimit – upfrontMIP;
} else { // Proprietary (Jumbo) Loan – simplified
// Proprietary loans can often allow borrowing a higher percentage of equity for older borrowers.
// Example multipliers:
if (borrowerAge >= 62 && borrowerAge = 70 && borrowerAge = 80) maximumLoanFactor = 0.70;
// Adjust for interest rate (simplified)
maximumLoanFactor -= (interestRate * 0.6);
if (maximumLoanFactor 0.70) maximumLoanFactor = 0.70;
estimatedLoanAmount = homeValue * maximumLoanFactor;
}
// Ensure the loan amount is not negative
if (estimatedLoanAmount < 0) estimatedLoanAmount = 0;
// The calculation of actual *disbursable* funds is complex and depends heavily on payout option and fees.
// For simplicity, we'll just show the estimated loan amount as "proceeds" and add a note about fees.
var formattedProceeds = estimatedLoanAmount.toFixed(2);
var explanationText = "";
if (loanType === "HECM") {
explanationText = "This is an ESTIMATED HECM principal limit after accounting for simplified upfront mortgage insurance (MIP). Actual proceeds will be reduced by closing costs, servicing fees, and other charges.";
} else {
explanationText = "This is an ESTIMATED Proprietary loan amount. Actual proceeds will be reduced by closing costs and other fees.";
}
if (loanPayout === "LumpSum") {
explanationText += " If taking a lump sum, a portion of the available funds may be restricted.";
} else if (loanPayout === "MonthlyTenure" || loanPayout === "MonthlyTerm" || loanPayout === "Combination") {
explanationText += " If taking monthly payments or a combination, the initial available funds may differ, and future payments are dependent on the chosen payout structure.";
} else if (loanPayout === "LineOfCredit") {
explanationText += " A line of credit allows flexible borrowing, with available funds potentially growing over time. The initial available amount is typically less than the total loan limit.";
}
resultValue.innerHTML = "$" + formattedProceeds;
resultExplanation.innerHTML = explanationText;
resultDiv.style.display = "block";
}