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Reverse Mortgage (HECM) Calculator

Calculation Summary

Gross Principal Limit: $0
Mortgage Payoff Required: $0
Net Cash Available: $0

*This is an estimate based on standard HUD Principal Limit Factors (PLF). Real-world results include closing costs and mortgage insurance premiums (MIP).

function calculateReverseMortgage() { var homeValue = parseFloat(document.getElementById("homeValue").value); var mortgageBalance = parseFloat(document.getElementById("mortgageBalance").value); var age = parseInt(document.getElementById("borrowerAge").value); var rate = parseFloat(document.getElementById("interestRate").value); if (isNaN(homeValue) || isNaN(mortgageBalance) || isNaN(age) || isNaN(rate)) { alert("Please enter valid numeric values."); return; } if (age 0.75) calculatedPlf = 0.75; if (calculatedPlf < 0.10) calculatedPlf = 0.10; // FHA Lending Limit for 2024 is $1,149,825 var maxAppraisal = Math.min(homeValue, 1149825); var grossLimit = maxAppraisal * calculatedPlf; var netCash = grossLimit – mortgageBalance; if (netCash < 0) netCash = 0; document.getElementById("grossLimit").innerText = "$" + grossLimit.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0}); document.getElementById("payoffRequired").innerText = "- $" + mortgageBalance.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0}); document.getElementById("netCash").innerText = "$" + netCash.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0}); document.getElementById("resultArea").style.display = "block"; }

Understanding the Reverse Mortgage Calculation

A Reverse Mortgage, specifically the Home Equity Conversion Mortgage (HECM), allows homeowners aged 62 and older to access a portion of their home equity without making monthly mortgage payments. Unlike a traditional loan, the balance grows over time as interest is added, and the loan is typically repaid when the homeowner sells the house, moves out, or passes away.

Key Factors Determining Your Payout

The amount of money you can receive from a reverse mortgage is determined by four primary factors:

  • The Youngest Borrower's Age: Older borrowers generally qualify for a higher percentage of their home equity because their life expectancy is shorter.
  • Current Interest Rates: Lower interest rates usually result in higher "Principal Limits" (the total amount you can borrow).
  • Appraised Home Value: The more your home is worth, the more equity is available, up to the FHA's maximum lending limit.
  • Existing Liens: Any current mortgage or HELOC must be paid off using the reverse mortgage proceeds before you can receive additional cash.

Realistic Example Case Study

The Scenario: Consider a 72-year-old homeowner with a home valued at $500,000 and an existing mortgage of $50,000. At a 6.5% interest rate, the calculation might look like this:

  • Principal Limit Factor (approx): 43%
  • Gross Principal Limit: $500,000 x 0.43 = $215,000
  • Mortgage Payoff: $50,000
  • Closing Costs (Est): $15,000
  • Remaining Cash: $150,000

In this case, the homeowner eliminates their monthly mortgage payment and gains access to $150,000 in cash or a line of credit.

Frequently Asked Questions (FAQ)

Do I still own my home?

Yes. You retain the title to your home. You are still responsible for property taxes, homeowners insurance, and basic maintenance.

When is the loan repaid?

The loan is due when the last surviving borrower or eligible non-borrowing spouse passes away, sells the home, or moves out for more than 12 consecutive months.

Can I owe more than my home is worth?

No. HECMs are "non-recourse" loans. This means neither you nor your heirs will ever owe more than the home's fair market value at the time of sale, even if the loan balance is higher.

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