Reverse Mortgage Loan Calculator

What is a Reverse Mortgage?

A reverse mortgage is a type of loan available to homeowners aged 62 or older, allowing them to convert part of the equity in their home into cash. Unlike a traditional mortgage, the borrower does not make monthly payments. Instead, the loan is repaid when the borrower sells the home, moves out, or passes away.

Formula for Calculating Reverse Mortgage Loan

The formula to calculate the future value of your reverse mortgage loan is:

\[FV = PV \times (1 + r)^n\]

Where:

• \(FV\) = Future Value (total loan amount)
• \(PV\) = Present Value (initial loan amount)
• \(r\) = Interest Rate
• \(n\) = Number of Years

Step-by-Step Calculation

1. Determine the initial loan amount (\(PV\)): \[PV = $10,00,000\]
2. Apply the interest rate (\(r\)) and number of years (\(n\)): \[r = 5\%\] \[n = 20 \text{ years}\]
3. Calculate the future value (\(FV\)) using the formula: \[FV = PV \times (1 + r)^n\] \[FV = 10,00,000 \times (1 + 0.05)^{20}\] \[FV = 10,00,000 \times 2.6533\] \[FV = $26,53,300\]

Example Calculation

Let's calculate the future value of a reverse mortgage loan for an individual with the following details:

• Initial Loan Amount (\(PV\)): $10,00,000
• Interest Rate (\(r\)): 5%
• Number of Years (\(n\)): 20 years

Using the formula, we get:

1. Initial loan amount: \(PV = $10,00,000\)
2. Interest rate: \(r = 5\%\)
3. Number of years: \(n = 20\)
4. Future value: \[FV = 10,00,000 \times (1 + 0.05)^{20}\] \[FV = 10,00,000 \times 2.6533\] \[FV = $26,53,300\]

Visual Representation

The green portion of the bar represents the calculated future value ($26,53,300) relative to the maximum possible value.