Home
Back
Reverse Mortgage Balance Formula:
| From: | To: |
Reverse Mortgage Balance Calculation determines the outstanding balance of a reverse mortgage loan, which grows over time as interest accrues on the principal amount. This calculation helps homeowners understand how much they owe on their reverse mortgage.
The calculator uses the reverse mortgage balance formula:
Where:
Explanation: The formula calculates compound interest on a monthly basis, showing how the reverse mortgage balance grows over time.
Details: Understanding the growing balance of a reverse mortgage is crucial for financial planning, especially for retirees who need to manage their home equity and anticipate future loan obligations.
Tips: Enter the principal amount in dollars, annual interest rate as a decimal (e.g., 0.05 for 5%), and the time period in months. All values must be valid (principal > 0, rate ≥ 0, months ≥ 0).
Q1: What is a reverse mortgage?
A: A reverse mortgage is a loan that allows homeowners aged 62 or older to borrow against their home equity while continuing to live in the home.
Q2: How does interest accrue on a reverse mortgage?
A: Interest accrues monthly on the outstanding balance and is added to the loan amount, causing the balance to grow over time.
Q3: When is the reverse mortgage balance due?
A: The balance is typically due when the borrower sells the home, moves out permanently, or passes away.
Q4: Can the balance exceed the home's value?
A: Most reverse mortgages are non-recourse loans, meaning the balance cannot exceed the home's value at the time of repayment.
Q5: Are there other costs besides interest?
A: Yes, reverse mortgages typically include origination fees, mortgage insurance premiums, and servicing fees that also add to the loan balance.