Reverse Mortgage Calculator

A reverse mortgage enables property owners to borrow funds using their home equity as security. A reverse mortgage calculator allows a proper estimation of how much you can borrow, depending on your unique circumstances. However, before using a reverse mortgage repayment calculator, you should know what this home loan type entails. It is available for Australian residents who are aged 60 or above. It helps homeowners access an income source or necessary funds in the sunset years of their lives.

Interest is charged on the funds, although the borrower does not require regular repayments. The debt, additional interest, and other fees are repaid from the property sale, either at the time of sale or upon the demise of the last surviving borrower. Using a reverse mortgage loan calculator will help you work out the loan you are eligible for and the total amount to be repaid.

The interest rates are usually higher than conventional home loans, and you can reside in your property without issues. Before learning how to use a reverse mortgage payment calculator, you should know that lenders set varying criteria for issuing these loans. They have stringent guidelines for the LVR (loan-to-value ratio) that borrowers can release. This is influenced by life expectancy and age. Experts feel that those above 60 may usually get 15-20% of the property value as their reverse mortgages while adding 1% for every additional year henceforth.

What is a Reverse Mortgage Calculator?

A reverse mortgage repayment calculator helps you choose whether a reverse mortgage is the best option to cater to your specific requirements at a certain stage of life. It will help you estimate how much you can borrow.

A reverse mortgage loan calculator will also help you estimate the cost of a reverse mortgage over varying durations, such as ten years or even 20 years. It will also allow you to view changes in your home equity over time based on the home value assumptions and the interest rate.

How Does UM Oceania's Reverse Mortgage Calculator Work?

UM Oceania offers an easy-to-use reverse mortgage calculator to help you understand what your reverse mortgage will cost you. This calculator takes you through several steps to determine the final cost.

You must enter all the necessary details and work it out yourself. This calculator simplifies the entire process. However, you have to specify three things, i.e. the amount you can borrow, the ways you can receive the payment, and the details of the mortgaged property.

How to use the Reverse Mortgage Calculator?

Using the reverse mortgage eligibility calculator is a seamless process. Here are the key points that you need to keep in mind:

• Step 1- Enter the youngest borrower’s age, the property's estimated value, the protected equity percentage, and the maximum borrowing ability are calculated automatically.
• Step 2- Choose your payment option, i.e. a lump sum, monthly payments, or a combination of both and then enter the amount you need (monthly or lump sum). Choose the mortgage term in years if you select the monthly payments or combination options.
• Step 3- Estimate the property growth rate. Enter the interest rate of the mortgage and also the monthly fees for the mortgage. You can also enter the upfront costs of the mortgage in this step.

The reverse mortgage calculator will help you view your results accordingly. These include the LVR (loan-to-value ratio), total loan amount, and, most importantly, the changes in your equity over a sustained period. It will also tell you when your equity drops to zero.

Features and Benefits of the Reverse Mortgage Calculator

Some of the most significant benefits and features of the UM Oceania reverse mortgage calculator include the following:

• Inclusion of Protected Equity
• Options for choosing lump sum, monthly or combination payments
• Options for entering upfront mortgage costs, estimated property growth, and monthly mortgage charges
• In-depth depiction of LVR through pie charts, along with showcasing the change in equity over time in relation to the loan balance and value of the property.
• Extensive amortization schedule available for users.
• Automatically shows maximum borrowing capacity.

How is the Reverse Mortgage Calculated?

The calculation of the reverse mortgage is done based on several factors. The loan cost depends on the following factors:

• The amount borrowed
• The method of taking the funds, i.e. as monthly payments or a lump sum amount. A lump sum will cost you more owing to compounding interest.
• The mortgage fees and interest rate. Some of these fees include valuation charges, loan establishment fees, ongoing fees, and so on.

The key principle behind the calculation is that the homeowner’s equity will reduce, with growth in debt over a specific duration. For example, suppose you are decided on the following parameters while using a reverse mortgage calculator:

• Age of youngest borrower- 60
• Estimated property value- $800,000
• Protected Equity- 0%
• Payment Option- Monthly Payments.
• Monthly Payment Required- $2,000.
• Mortgage Term- 5 years.
• Estimated property growth- 4%.
• Mortgage interest rate- 8.50%.
• Monthly mortgage fees- $10.
• Mortgage upfront costs- $1,500.

In this case, the calculator shows $120,000 as the amount you can borrow. The other results are the following:

• The LVR (loan-to-value ratio) is 15%.
• The equity falls to zero at > 40 years.

If you look closer at the amortization sheet, you will find that in the 40^th year and 480 months, the loan balance will be $2,970,969, while the property value will be $3,951,897. At the same time, the remaining equity will stand at $980,928. This is only an illustrative example; you can use the reverse mortgage loan calculator with specific figures and estimates per your requirements.

Pros and Cons of the Reverse Mortgage Calculator

There are many advantages of using a reverse mortgage calculator, and some of them include the following:

• Instant calculation of LVR and the point where equity comes down to zero.
• Detailed amortization schedule showing changing equity, loan balance, and property value.
• Huge scope for personalization with inclusions for fields like protected equity, age, mortgage interest, charges, method of receiving the funds, and so on.
• Easy calculation of maximum mortgage amount.
• It enables better decision-making for homeowners, who can contrast different scenarios and determine whether a reverse mortgage suits them.

While there are no disadvantages, the only thing worth mentioning here is that while using the calculator, homeowners should be cautious about the figures and scenarios they opt for. Choosing the wrong structure for the loan will not be good in the long run.

Hence, whatever the calculator's results, they should be shared with financial advisors to take the right decisions.

Things you Should Know About the Reverse Mortgage Calculator

Here are some other things you should know about reverse mortgage calculators:

• These calculators work based on several assumptions, including the property value, mortgage interest rate, etc.
• They can be used for free without paying a single penny.
• The results are instantaneously calculated with detailed amortization sheets to match.

Before deciding, you can use these calculators to compare and contrast various loan structures and numbers.