How Is Interest Calculated On A Reverse Mortgage

Jeannette 3 years ago 2 min read

Before you take out that reverse mortgage, you need to know about the interest calculated on it. How is interest calculated on a reverse mortgage?

As we grow older we often wonder how we will make ends meet. That is expressly more important today since many older folks have lost a considerable amount of their savings with the recent stock market collapse. A reverse mortgage may by one way that can be utilized to afford a better future when you own your own home. Knowing how is interest calculated on a reverse mortgage can help to make that decision.

How is interest calculated on a reverse mortgage?

Since there are more than one type of reverse mortgage it stands to reason that the interest would be calculate differently for each individual type. Below, we will discuss two types of reverse mortgages.

Single purpose reverse mortgage

These loans are given by lenders like mortgage lender in Colorado Springs in order to accommodate one particular need of the borrower. That purpose could be to make needed renovations or repairs to the home itself. Since these loans are intended to offer a loan that is low in cost you will usually pay a lower interest at a fixed rate, making them affordable for those on fixed incomes.

Home equity conversion mortgage

These are figured on either a fixed rate or adjustable rate, with the adjustable rate being subject to change as the market changes. To figure either interest rate you would need to divide the current interest rate by 100 and then divide that number by 12, which gives you the monthly interest rate. You will then multiply this number by the amount of your monthly payment to get the interest you will be paying each month.