This is a reverse line of credit (LOC) loan calculator that will generate an accretion table (reverse amortization schedule) for a variable rate CMT HECM mortgage.
There is one section for the input:
- Mortgage Parameters
There are five sections for the output:
- Mortgage Parameters
- Mortgage Amounts
- Financed Closing Costs
- Mandatory Obligations
- Reverse Mortgage Amortization Schedule
The "Mortgage Parameters" section, a crucial part of the input, serves as the foundation for the other four sections. It involves the age of the youngest borrower and the expected CMT interest rate, which are used to obtain the HECM principal limit factor. This factor is then used to calculate the initial principal limit, by multiplying the HECM principal factor by the maximum claim amount.
The "Financed Closing Costs" will include an upfront mortgage insurance premium (MIP), which is typically 2% of the maximum claim amount. The maximum claim amount is the lesser of the property value or the FHA maximum amount of $1,149,825. In addition to upfront MIP, other closing costs are calculated as a percentage of the maximum claim amount.
The "Mandatory Obligations" section is of utmost importance as it consists of any loans to be paid off at the closing and the financed closing costs. This section ensures that there will be sufficient funds at closing to cover the mandatory obligations.
The "Mortgage Amounts" section will show the 'initial advance', which is the initial amount drawn from the line of credit (LOC) that is paid out at the closing. The 'initial line of credit' (LOC) is the total amount of credit available to the borrower at the end of the first year. The initial advance is typically 10% of the initial principal limit unless the initial line of credit and the net principal limit are insufficient to allow for the full amount. If the net principal limit or the initial advance are negative, the mortgage is "short to close" and the borrower would potentially be required to cover this shortfall.
The "Reverse Mortgage Amortization Schedule" section will show the annual MIP, loan balance, interest accrual, line of credit, principal limit, property value, and equity. The yearly interest accrual and MIP compound the loan balance. The principal limit increases annually by the expected rate and the ongoing MIP. The property value increases by an estimated appreciation. Once the loan balance reaches the principal limit, the line of credit will be 0, and the loan balance will grow in line with the principal limit.
