Calculating Reverse Mortgages

by Wade Pfau, Ph.D., CFA

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I have created a calculator that allows users to get a sense of the principal limit available with an HECM reverse mortgage on their home using the most popular one-month variable rate option. The calculator asks for eight boxed inputs, and uses these inputs to calculate the net principal limit. It also provides the amount of income that could be received as a tenure payment for those seeking this option. An optional ninth input also allows for a term payment amount to be calculated. I will describe tenure and term payments in detail later, but the calculator provides sufficient definitions for now.

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