South River Mortgage: loan balance and equity illustration
Your projection
| Year | Interest rate | Interest added | MIP added | Loan balance | Assumed home value | Remaining equity |
|---|
* The loan balance is higher than the assumed home value, so remaining equity is shown as $0. A $0 equity figure does not mean the loan balance is forgiven or capped. An FHA-insured HECM is non-recourse; the lender cannot recover a shortfall from your or your heirs' other assets. When the loan becomes due after the last borrower and any protected eligible non-borrowing spouse have died, heirs who want to keep the home have the option to pay off the loan for the lesser of the balance or 95% of the home's appraised value. See the CFPB's guidance on what happens to a reverse mortgage when you die.
Remaining equity is not the same as what you can borrow
Remaining equity is the assumed home value minus the loan balance. This illustration subtracts only the modeled reverse-mortgage balance and floors the result at $0; it excludes selling costs and other liens and is not an estimate of net sale proceeds. It is not money available to borrow.
How much a HECM lets you borrow, called the principal limit, is set separately. It uses HUD's principal limit factors, the age of the youngest borrower or eligible non-borrowing spouse, the expected interest rate, and the maximum claim amount: the lesser of the home's appraised value or the FHA lending limit (for a home purchase, the purchase price is also considered). See the CFPB's reverse mortgage key terms. Any unused line of credit grows on its own schedule. Use the reverse mortgage calculator to estimate borrowing capacity, and the line of credit growth calculator to see how an unused line can grow.
How this projection works and its limits
- No loan payments are made. Interest is charged each month at one-twelfth of the yearly rate and added to the balance, so it compounds monthly.
- The annual mortgage insurance premium is charged the same way, on the balance, and added to it each month.
- A rate change, if entered, starts at the beginning of the year you choose and stays in place. Real adjustable rates follow an index plus a margin, within caps set in the loan documents, and can move up or down.
- Home value changes once a year at the rate you enter. Real home values can rise, stay flat or fall.
- New draws, monthly payments to you, servicing fees and any voluntary repayments are not included. Each of these changes the balance.
- You must keep paying property taxes, homeowners insurance and upkeep, and live in the home as your primary residence. Not meeting these obligations can make the loan due.
- This is not a loan estimate, an offer to lend, or a decision about eligibility. Your actual figures depend on your loan terms.