Home
Back
Reverse Mortgage Equation:
| From: | To: |
The Reverse Mortgage Calculator estimates the principal limit available to homeowners through a reverse mortgage program. It calculates the maximum amount that can be borrowed based on home value, lending limits, and principal limit factors.
The calculator uses the reverse mortgage equation:
Where:
Explanation: The equation calculates the available principal limit by taking the minimum of home value or lending limit, then multiplying by the principal limit factor which varies based on age and interest rates.
Details: Accurate principal limit calculation is crucial for seniors considering reverse mortgages to understand their borrowing capacity, plan for retirement income, and make informed financial decisions about their home equity.
Tips: Enter home value in dollars, lending limit in dollars, and principal limit factor (typically between 0.4-0.6 based on age and current interest rates). All values must be positive numbers.
Q1: What is a principal limit factor?
A: The PLF is a percentage that determines how much of your home's value you can borrow. It's based on the age of the youngest borrower and current interest rates.
Q2: How is the lending limit determined?
A: Lending limits are set by the Federal Housing Administration (FHA) and vary by county based on local home prices. There's a national ceiling that changes annually.
Q3: Can I get more than the lending limit?
A: No, reverse mortgages are capped at the FHA lending limit for your area, regardless of your home's actual value.
Q4: What costs are associated with reverse mortgages?
A: Reverse mortgages typically include origination fees, mortgage insurance premiums, closing costs, and servicing fees that reduce the net proceeds available to borrowers.
Q5: When does a reverse mortgage need to be repaid?
A: The loan becomes due when the last borrower permanently leaves the home, sells the property, or passes away. Heirs typically have options to repay the loan or sell the property.