If you are looking for ways to raise extra cash in retirement then you may be considering a HECM loan. The AARP reverse mortgage calculator can give you a useful estimate of how much money you may be eligible for. How does this online calculation work and how useful will it be in the decision-making process?
What is the AARP Reverse Mortgage Calculator?
This online tool is designed to give you an estimate of how much cash you may be able to release from the equity in your home. You feed a range of data into the calculator and it will then use this information to show possible loan amounts for various HECMs.
How is Reverse Mortgage Information Calculated?
You only need to answer four questions to get estimated loan options.These are:
- Zip code
- Date of birth
- The date of birth of a co-owner/spouse, if applicable
- The value of your home (this can be an estimate)
This information allows the tool to make some basic calculations. You will then be taken to a results page which compares a variety of possible loans to give you an idea of how much a reverse mortgage may be worth to you.
Estimating Fixed and Adjustable Rate HECMs
The AARP calculator works with both fixed and adjustable HECMs. Adjustable loans come with a variable interest rate that can change on a monthly basis; fixed products have a set rate that may change once a year. The tool also looks at Standard and Saver options, giving you four possible estimates for your equity release:
- HECM Standard 1-month LIBOR
- HECM Standard Fixed Rate
- HECM Saver 1-month LIBOR
- HECM Saver Fixed Rate
Fixed rate options only show a lump sum option. Adjustable rate HECMs, however, display all available payment types, including:
- Single lump sum
- Creditline account
- Monthly advance
It is possible to combine payment types with this kind of reverse mortgage. This is not, however, illustrated on the calculator. If you wish to investigate how the line of credit option would work for you, you can then proceed to the Creditline page to see how different withdrawals might affect your cash reserves.
How Useful is the AARP Reverse Mortgage Calculator?
The information you get here is based on an estimate and you can't assume that it will be exactly the same sum you would get if you went on to apply for an HECM. There are variables that could affect an actual application that cannot be factored into this calculator. The AARP Reverse Mortgage Calculator is, however, a quick and easy way to get an estimate of possible lump sum/income amounts that could help you decide whether reverse mortgages are worth further investigation.
You may also find it useful to:
- Learn more about how reverse mortgages work.
- Get advice from a HUD-approved reverse mortgage counselor.
- Consider alternative ways to boost retirement income.
Sources: AARP; HUD FHA Reverse Mortgages for Seniors (HECM). Accessed online 19th January, 2011.
Carol Finch - Carol Finch is the Topic Editor for Retirement Planning, Budgeting, E-Commerce & Technical/Business Writing on Suite101.
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