HECM Calculator - Steps for Processing


The basic procedure for processing HECM Calculator includes the following:

Entering Case Information

Information in the Case Information section of the page is added as follows:

  1. Enter the primary borrower's name in the Borrower Name (Last, First MI) field (example: Smith, John A).

  2. If necessary, select the date range in which an FHA case number is assigned to the HECM from the drop-down list in the Case Number Assigned field.

  3. If necessary, select the type of HECM mortgage insurance premium (MIP) that corresponds to the date an FHA case number is issued from the drop-down list in the HECM Type field.

  4. For a HECM refinance, select Yes from the drop-down list in the Refinance field.

  5. Select the type of loan amortization from the drop-down list in the Amortization Type field.

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Entering HECM Calculator Information

For the HECM Calculator section of the page, please note the following:

To complete the HECM Calculator section of the page, do the following in the Variables column:

  1. Enter the date of the loan closing in the Date of Closing MM/DD/YYYY field, using the format specified.
    -or-
    Click Calendar to select a date.

  2. Enter the birthdate of either the youngest borrower (mortgagor) or eligible non-borrowing spouse in the Borrower/Non-Borrowing Spouse Birth MM/DD/YYYY field, using the format specified.
    -or-
    Click Calendar to select a date.

    Notes:
    The borrower or eligible non-borrowing spouse must be 18 years or older. (Eligible non-borrowing spouse means a non-borrowing spouse who meets the qualifying attributes requirements established for a deferral period. See Mortgagee Letters 2015-02 and 2014-07 for more information.)
    Age is rounded to the nearest whole year.
    If the current month is the birth month, the borrower's birthday is assumed to have already occurred.

  3. Enter an expected average mortgage interest rate value between 3.0 and 18.875 in the Expected Interest Rate field.
    For adjustable interest rate mortgages, the Expected Interest Rate is the sum of the 10-year Constant Maturity Treasury interest rate index plus the lender’s margin or 10-year LIBOR Swap rate plus the lender’s margin.
    For fixed interest rate mortgages, enter the note interest rate.
    If the Case Number Assigned date is earlier than October 2, 2017, the interest rate cannot be more than 10.
    Rates are rounded to the nearest 1/8th percent to determine the principal limit factor displayed in the Prin Lim - Shared Prem Fac field. The entered rate is used for other calculations.

  4. Enter the property appraised value (excluding closing costs) in the Property Appraised Value field. This value will be used in calculating the future value of the property.

  5. Enter the lesser of the following in the Maximum Claim Amount field:
    appraised value of the property, as determined by the appraisal used in underwriting the loan; or
    the national mortgage limit under Section 255 (g) or (m) of the National Housing Act, or
    the sales price of the property being purchased for the sole purpose of being the principal residence.
    This value will be used to calculate the Initial Principal Limit.

  6. For a refinance case for which a case number was issued on or after September 19, 2017, enter the maximum dollar amount HUD would pay on a claim for insurance benefits for the prior HECM loan on this property in the Prior Loan Maximum Claim Amount field. This amount was the lesser of:
    appraised value of the property, as determined by the appraisal used in underwriting the loan; or
    the national mortgage limit under Section 255 (g) or (m) of the National Housing Act, or
    the sales price of the property being purchased for the sole purpose of being the principal residence.
    This value was used to calculate the Initial Principal Limit on the prior loan for this property.

  7. For a refinance case, enter the amount of the initial mortgage insurance premium (MIP) paid on the prior FHA-insured loan that is being refinanced in the Prior Loan MIP Paid Amount field. Note: This information may be available through Case Query on the FHA Connection.

  8. If the borrower intends to pay the initial (upfront) mortgage insurance premium (MIP) in cash, enter the amount in the Initial Premium field. If the MIP is to be financed, leave the Initial Premium field blank. The word FINANCED appears in this field when calculated. Per 24 CFR 206.25, the initial MIP is a mandatory obligation. HECM Calculator computes the initial MIP independent of other closing costs that are financed into the loan under Mandatory Obligations. For a refinance case, the initial mortgage insurance premium is calculated as follows:

    A.

    New Maximum Claim Amount multiplied by new initial MIP percent = New MIP

    B.

    Old Maximum Claim Amount multiplied by old initial MIP percent = Old MIP

    C.

    Subtracting the result of B. from the result of A. yields the initial MIP amount due to HUD.


  9. Enter additional closing costs being financed in the Other Closing Costs field. These costs include origination fee, appraisal fee, and other fees allowed at closing. Note: The initial (upfront) mortgage insurance premium (MIP) is automatically included in the previous line (if financed). Do not include this MIP with Other Closing Costs.

  10. Enter the total amount of money required at loan closing to pay off all mortgages and other property liens in the Discharge of Liens field.

  11. If repairs are required to be completed after loan closing and during the first 12-month disbursement period, enter 150% of the costs of repairs plus the repair administration fee in the Repair Set Aside field (not to exceed $187,650). Note: The repair administration fee may not exceed the greater of one and one-half percent (1.50%) of the funds used for repairs or $50 for the administration of repairs completed during the first 12-month disbursement period.

  12. When a borrower is required or voluntarily elects to have a Life Expectancy Set Aside (LESA) or the borrower is not required to have a LESA and elects to have the lender pay property charges from their monthly payment or line of credit, enter one of the following in the T&I First Year Payments field:
    Fully-Funded LESA: Enter the total amount of property tax and flood and hazard insurance charges scheduled for payment during the first 12-month disbursement period. Do not include tax and hazard and flood insurance payments that were required by the lender to be paid at loan closing since that amount should be included in the Other Closing Costs field.
    Partially-Funded LESA: Enter the total amount of semi-annual disbursements scheduled to be made to the borrower during the first 12-month disbursement period. Do not include tax and hazard and flood insurance payments that were required by the lender to be paid at loan closing since that amount should be included in the Other Closing Costs field.
    Monthly Payment or Line of Credit Payments: Enter the total amount that will be withheld from the monthly payment or disbursed from the line of credit during the first 12-month disbursement period for the payment of property taxes, and hazard and flood insurance payments. Do not include tax and hazard and flood insurance payments that were required by the lender to be paid at loan closing since that amount should be included in the Other Closing Costs field.
    Note: T&I 1st Year Payments must be calculated in accordance with FHA regulations and requirements at loan closing using known data.

  13. Enter the amount of any additional 10% of Initial Principal Limit (IPL) that the borrower intends to use at loan closing and during the first 12-month disbursement period after loan closing in the Additional 10% IPL Usage field.

  14. Enter the amount of any one-time payment paid to the borrower at loan closing in the Cash to Borrower at Closing field. This includes funds taken from the Additional 10% of the Initial Principal Usage for which the borrower is eligible to receive. Do not enter the first regular monthly payment.

  15. Enter the amount of personal funds the borrower will bring to settlement to offset the closing cost charges or the amount needed to satisfy liens against the property in the Cash from Borrower field. An amount must be entered when the principal limit is exceeded or when the borrower volunteers to pay a portion of their closing costs from personal funds.

  16. Enter the amount of funds the lender will pay at loan closing towards the borrower’s closing cost charges in the Cash from Lender/Interested Party Contributions field. For a HECM purchase transaction, enter the amount of Interested Party Contributions.

  17. If servicing charges are built into the Note interest rate, enter the flat monthly servicing fee in the Monthly Servicing Fee field.

  18. If applicable, enter the result of the fully-funded LESA amount required at loan closing minus the T&I 1st Year Payment amount in the Net Fully-funded LESA Amount field. This amount will be used by the lender to make payments to the taxing authority and insurance carrier on behalf of the borrower.
    -or-
    Enter the result of the partially-funded LESA amount required at loan closing minus the T&I 1st Year Payment amount in the Net Partially-funded LESA Amount field. This amount will be used by the lender to make semi-annual payments to the borrower to compensate for his or her monthly residual income shortfall. The semi-annual payments to the borrower must be combined with personal funds to make timely property tax and hazard and insurance premium payments.

  19. For an Amortization Type of ARM, do the following:
    Enter the desired line of credit in the Line of Credit Life of Loan field. If an amount is entered in this field, do not enter an amount in the the Monthly Payment Life of Loan field.
      -or-
    Click the blank field to have the maximum monthly payment calculated by the system. The word CALCULATE appears in the field after it is clicked.
    Note: The maximum line of credit is the Net Principal Limit.

    For an Amortization Type of Fixed, enter zero (0) in the Line of Credit Life of Loan field.

  20. For an Amortization Type of ARM, do the following:
    Enter the desired monthly payment amount in the Monthly Payment Life of Loan field. If an amount is entered in this field, do not enter an amount in the Line of Credit Life of Loan field.
      -or-
    Click the blank field to have the maximum monthly payment calculated by the system. The word CALCULATE appears in the field after it is clicked.
    Note: The maximum line of credit is the Net Principal Limit.

    For an Amortization Type of Fixed, enter zero (0) in the Monthly Payment Life of Loan field.

  21. Enter the number of months payments are desired in the Length of Term (in months) field. The Length of Term (in months) is computed based on the age of the youngest borrower. The Length of Term (in months) for tenure payments is 100 minus the age of the youngest borrower multiplied by 12. Borrowers over the age of 95 are treated as if they were 95 for the purposes of this calculation. Here is an example of a borrower who is 70 years of age:
    Step 1: 100 - 70 = 30 (years until age 100)

    Step 2: 30 x 12 (number of months in year) = 360 months
    Step 3: 360 is entered as the Length of Term (in months)

  22. Enter the birthdate of the youngest borrower (mortgagor) in the Youngest Borrower/Non-Borrowing Spouse Birth MM/DD/YYYY field, using the format specified.
    -or-
    Click Calendar to select a date.

    This information is required to get an amortization report. Otherwise, the field can be left blank.

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Submit for Processing

When all the required information has been entered on the HECM Calculator page, do one of the following:

If there is an error, one of the following occurs:

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Getting the Factor Table

To get the appropriate factor table for determining the borrower's principal limit:

  1. Click the Factor Table link above the HECM Calculator form. A pop-up HECM Calculator Factor Request page appears.

  2. Enter a whole number between 3 and 18 in the Interest Rate (3-18) or 99 for All field to get a table of rates for ages 18 to 99 with interest rate increments based on the number entered.

    -or-

    Enter 99 to view a table of all rates.

    Note: If the Case Number Assigned date is earlier than October 2, 2017, the interest rate cannot be more than 10.

  3. Click Send. The HECM Calculator - Factor Table is displayed.

    -or-

    If there is an error, a pop-up message appears explaining the error. Click OK to close the message and make the correction.

    Note: The Factor Table goes up to age 99. Borrowers over 99 are treated as if 99.

  4. Click Print at the bottom of the page to print the table.

    -and/or-

    Click Close to close the pop-up page.

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Getting an Amortization Report

If the data entered was successfully calculated, Monthly Amortization Report and Annual Amortization Report links appear above the HECM Calculator form.

  1. If necessary, enter the birthdate of the youngest borrower (mortgagor) in the Youngest Borrower/Non-Borrowing Spouse Birth MM/DD/YYYY field, using the format specified and click Calculate.
    -or-
    Click Calendar to select a date and click Calculate.

  2. Click the Monthly Amortization Report or Annual Amortization Report link. The report is displayed in PDF format in a new browser tab/window.

  3. Use the features of your browser to print, close, download, and save the report.

If two sets of values were entered for comparison, the latest set entered is reflected in the reports.

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Last revised: October 27, 2023