Seniors: Estimate Payments With a Reverse Mortgage Calculator

Older homeowners can qualify for a special type of home-equity loan called a reverse mortgage, which does not require monthly payments. Also called a home-equity conversion loan (HECL), this program is designed for those age 62 and older. Using a reverse mortgage calculator can help you determine if this type of home loan is right for you.

Candidates for a Reverse Mortgage

In addition to those who meet the age requirement, reverse mortgages tend to be most advantageous for those who plan to stay in their home during retirement and can afford to maintain the property. Your home must be your primary residence, and you must have a small enough mortgage balance that it could be paid off with the loan proceeds.

How Reverse Mortgages Work

This program allows you to access home-equity funds to pay off debt, cover unforeseen expenses, and/or improve cash flow. If you qualify for a reverse mortgage, you’ll receive a payment each month from your home equity. Once you sell the home, move, or pass away, the balance of the loan becomes due. You or your heirs can then pay the loan off and keep the home or let the bank keep the home.

Calculating Reverse Mortgage Terms

The amount of money you’ll receive from the loan and the amount that you will ultimately owe depend on a few factors. To calculate the terms of your reverse mortgage, you’ll need to enter the lump sum payment of the loan, the number of years you expect to draw money from your home equity, the amount of money you plan to receive monthly, and the interest rate.

For example, if you receive a lump sum of $50,000 and a monthly advance of $500 at an interest rate of 4 percent, you will owe a total of $148,412 after 10 years. An online reverse mortgage calculator allows you to explore different scenarios and determine the size of the loan you should take.

While a reverse mortgage is a smart retirement strategy for many homeowners, it’s important to consult with a financial professional to determine whether this type of loan is right for you.