New Reverse Mortgage Calculator: How to Assess Your Suitability for these Loans

A reverse mortgage is a loan. You are borrowing against your home equity. However, unlike traditional mortgages, with a reverse mortgage you do not have to pay back the money borrowed as long as you are living in the home.

For many senior households, housing is usually the most costly expense as well as the most valuable asset. A reverse mortgage takes advantage of both of these facts. The loan enables you to eliminate ongoing mortgage payments, and for borrowers with sufficient home equity, access cash to use as needed or desired. However, the decision to secure the loan can be complicated and confusing.

Almost all financial products have pros and cons. Reverse mortgages are no exception.

Some of the factors you will want to consider include:

  • Your need for supplemental income or improved cash flow by eliminating mortgage payments
  • Your desire for financial independence
  • ​Your ability to stay in your existing home for the long term
  • ​Your financial values and attitudes toward loans
  • ​Your interest in maximizing your estate for heirs

What Are the Main Reasons Other People Get a Reverse Mortgage?

We offer a Reverse Mortgage Suitability Calculator that assesses whether or not the loan is a good fit for you. So far over 370,000 people have used this tool, and for these people the strongest reasons to secure a reverse mortgage are:

  • The desire for financial independence
  • The wish to remain in their own home for the rest of their lives

For those with some savings — but perhaps not enough to feel comfortable throughout retirement — the line of credit option provides instant access to cash to optimize drawdown strategies when unexpected expenses arise and during market downturns. If you get the line of credit now, the amount you can borrow grows as you age, effectively locking in immediate access to home equity when you need it most.

Reverse Mortgage Disadvantages

While there may be strong reasons to get a reverse mortgage and much has been done over the years to make reverse mortgages a stronger product, there are some downsides.

Here are some possible disadvantages to the product that you should consider when assessing your suitability:

  • You Accumulate Interest: There are no monthly payments on a reverse mortgage. As such, the loan amount — the amount you will eventually have to pay back — grows larger over time. Every month, the amount of interest you will eventually owe increases — it accumulates. However, the amount you owe on the loan will never exceed the value of the home when the loan becomes due. The loan and accumulated interest become due when you and your spouse die or move out of the home.
  • ​Disappointing Loan Amounts: Some reverse mortgage borrowers are disappointed by the amount of money they can borrow with a reverse mortgage. Your actual loan amount is determined by a calculation using the appraised value of your home, the amount of money you owe on the home, your age and current interest rates.
  • ​The Loans Are Complicated: The basics of reverse mortgages can seem so foreign to people.

On the other hand, the advantages of the loans are clear. Reverse mortgages enable you to eliminate your traditional mortgage payments and/or access your home equity while still owning and living in your home. Given the right set of circumstances, a reverse mortgage can be an ideal way to increase your spending power and financial security in retirement.

Furthermore, the loans are flexible, have a low risk of default and are tax free.

New Reverse Mortgage Calculator Assesses Your Suitability – Is a Reverse Mortgage Right for You?

Many reverse mortgage calculators exist to help you estimate your loan amount or to assess whether you qualify for the loan or not, but – until now – nothing has helped you assess your suitability for a reverse mortgage.

HomeownersOfAmerica is proud to introduce the Reverse Mortgage Suitability Survey. This calculator takes you through five questions and assesses whether the loan is something you should consider or not.

Reverse mortgages can be great for many people but is it right for you? The reverse mortgage suitability test gives you an overall grade about whether or not a reverse mortgage is something you should consider. You also get personalized commentary on various aspects of the loan and how they will impact your retirement.

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*Of course, to take advantage of these loan features, homeowners must maintain the home, pay property taxes, retain homeowners insurance and comply with the terms, as you would with other mortgages.

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