How the Reverse Mortgage Loan Amount or Line of Credit is Calculated
The criteria that determine the reverse mortgage loan amount are established by the Federal Housing Administration (FHA). Whether you will be taking a lump sum, monthly income, or a reverse mortgage line of credit, three primary factors are considered in the calculation:
1. the age of the youngest borrower
2. the value or purchase price of the home
3. the current interest rate
Using this information, the FHA reverse mortgage calculator will determine the gross amount funds available called the Principle Limit. From the Principle Limit, the calculator will estimate the fees permitted under FHA program guidelines and subtract this amount. And, finally, the amount needed to pay off all existing mortgages is deducted. The balance of the reverse mortgage loan amount is now available for the borrower to use at their discretion.