US Reverse Mortgage Calculator & Best Payment Option (HECM)
US Reverse Mortgage Calculator
If you live in the United States of America, here is the link for the US Reverse Mortgage Calculator for HECM Reverse Mortgage loans.
Over there, you can input fields like Lump sum advance, No. of years, Monthly Loan advance, Interest rate, etc. to get the loan balance, year-wise. You can also find out the current mortgage rates based on your zip code, property value, loan amount, etc.
Best Reverse Mortgage Payment Option (HECM)
‘Line of Credit’ is the Best Payment Option for a HECM reverse mortgage. Before we tell you why, here are a few basic things you need to know about reverse mortgage loans.
What is Reverse Mortgage & Who is eligible for one?
In a conventional home loan, the bank lends you money to buy a house. And you repay it in installments.
In a reverse mortgage, you already own a house. You pledge it to the bank and the bank ‘loans’ you money.
Generally, you don’t pay it back and you continue to live in the house. After your death, your heirs pay it back – mostly they would sell the house to pay the loan, or pay it themselves if they wish to retain the house.
In short, instead of selling the house to get money, you keep the house and still get money!
That was the over-simplified version. Read this longish article to know much more about Reverse Mortgage.
What’s the Catch? Are the interest rates higher?
Yes. In addition, there are other fees for reverse mortgages as well. According to this article from aarp.org,
In August 2019 the average fixed-rate reverse mortgage had a 4.81 percent interest rate, compared with 3.55 percent for a 30-year fixed-rate mortgage.
https://www.aarp.org/money/credit-loans-debt/info-2019/reverse-mortgage-loan-advice.html
Is Reverse Mortgage beneficial to me and my heirs?
A reverse mortgage is beneficial to you – if you are a senior citizen with a house and you don’t have sufficient savings. It is beneficial especially if you are unable to pay existing home loans as you can cash in on the equity available to you via your own primary home minus the loan value.
Be sure to input actual figures and check what exactly is available to you via the US reverse mortgage calculator linked to at the beginning of this article.
Your heirs would also benefit – they get the remaining equity from the house after they pay off your loan upon your death. They would mostly sell the house to pay off your loan.
In simple words – you’ve worked hard to plant and grow a tree, now why not enjoy its fruits? You deserve it more than anyone else.
What is the Best Payment Option for a Reverse Mortgage?
HECM Reverse Mortgage offers Payment Options like,
- Lumpsum disbursement
- Fixed monthly cash advances
- Line of credit (withdraw only when you need it)
- A combination of the above
Although there are no taxes applicable for reverse mortgage payments, bank interest charges, insurance, and other fees do apply. But the bank interest is only charged on the amount of money that is actually given to you. Not the amount available to you as line of credit.
So, unless you require all the money immediately, you are better off taking a reverse mortgage line of credit and withdrawing money as and when you need it. This will help you reduce the amount you pay as bank interest.
Here is a video that explains more about Reverse Mortgages and Line of Credit.
PS: The views mentioned in this article are the opinion of the author. Readers are encouraged to research further and consult a tax professional to know more about the pros and cons before deciding on a reverse mortgage. The US Reverse Mortgage Calculator linked here might also help.