Reverse Mortgage Calculator

Introduction

A reverse mortgage lets homeowners aged 62 or older turn part of their home equity into cash. Instead of making monthly payments to a lender, the lender pays you. The loan is paid back when you sell the home, move out, or pass away. This Reverse Mortgage Calculator helps you estimate how much money you could receive based on your age, home value, and current interest rates. Use it to get a clear picture of your options before making any decisions about your home equity.

How to Use Our Reverse Mortgage Calculator

Enter a few details about your home and loan to find out how much money you could get from a reverse mortgage.

Your Age: Type in your current age. You must be at least 62 years old to qualify for a reverse mortgage. The older you are, the more money you may be able to borrow.

Home Value: Enter the current market value of your home in dollars. This is how much your home would sell for today. A higher home value means you could receive more money.

Existing Mortgage Balance: Enter the amount you still owe on your current mortgage. If your home is fully paid off, enter zero. Any remaining balance will be paid off first using the reverse mortgage funds. If you're unsure of your remaining balance, our Mortgage Payoff Calculator can help you figure it out.

Interest Rate: Enter the expected annual interest rate for the reverse mortgage. This rate affects how much you can borrow and how fast your loan balance grows over time.

Payment Option: Choose how you want to receive your money. Options typically include a lump sum (one large payment), monthly payments, or a line of credit you can draw from when needed.

Loan Term: Enter the number of years you plan to stay in your home. This helps estimate how much interest will build up on the loan and what the total balance will be over time. You can explore how compound interest works to better understand how loan balances grow.

What Is a Reverse Mortgage?

A reverse mortgage is a special type of home loan available to homeowners who are 62 years or older. Instead of you making payments to a lender, the lender pays you. It lets you turn part of the equity in your home into cash without having to sell your house or make monthly mortgage payments.

How Does a Reverse Mortgage Work?

With a regular mortgage, you borrow money to buy a home and pay it back over time. A reverse mortgage works the opposite way. You already own your home (or most of it), and the lender gives you money based on how much your home is worth. The loan doesn't have to be paid back until you move out, sell the home, or pass away.

The amount you can borrow depends on a few key things:

• Your age — The older you are, the more you can borrow.
• Your home's value — A higher home value means more money available to you.
• Current interest rates — Lower rates mean you can get more money. You can use our APR Calculator to better understand how rates affect borrowing costs.
• Your existing mortgage balance — Any remaining balance on your current mortgage must be paid off first using the reverse mortgage funds.

Types of Reverse Mortgages

The most common type is the Home Equity Conversion Mortgage (HECM), which is backed by the federal government through the FHA. If you're interested in comparing this to a government-backed forward mortgage, check out our FHA Loan Calculator. There are also proprietary reverse mortgages offered by private lenders, which can sometimes allow you to borrow more if your home has a high value.

Things to Keep in Mind

While a reverse mortgage can be a helpful tool, there are important costs and risks to understand. You will still need to pay property taxes, homeowners insurance, and maintenance costs on your home. Our Property Tax Calculator and Homeowners Insurance Calculator can help you estimate those ongoing expenses. If you fall behind on these, you could lose your home. The loan balance also grows over time because interest is added to what you owe each month. This means the equity in your home goes down as the loan balance goes up.

There are also upfront costs like origination fees, closing costs, and mortgage insurance premiums. These can be rolled into the loan, but they reduce the amount of cash you receive. Use our Closing Cost Calculator to get an idea of what these fees might look like.

Who Should Consider a Reverse Mortgage?

A reverse mortgage can be a good fit for retirees who own their home, plan to stay in it for a long time, and need extra income. If you're exploring broader retirement planning strategies, tools like our Retirement Calculator and Net Worth Calculator can help you see how a reverse mortgage fits into your overall financial picture. It is not ideal if you plan to move soon or want to leave your home to your heirs free of debt. If you're weighing whether to stay or go, our Rent vs Buy Calculator and Home Affordability Calculator may also be useful. Always talk to a HUD-approved counselor before making a decision.

Frequently Asked Questions

What is a HECM reverse mortgage?

A HECM (Home Equity Conversion Mortgage) is the most common type of reverse mortgage. It is backed by the FHA and lets homeowners aged 62 or older borrow against their home equity. You do not make monthly payments. The loan is repaid when you sell, move out, or pass away.

What is the FHA lending limit and how does it affect my calculation?

The current FHA lending limit is $1,149,825. If your home is worth more than this amount, the calculator uses $1,149,825 as the basis for your HECM calculation, not the full home value. This cap applies to all HECM loans regardless of your actual home value.

What is the Principal Limit Factor (PLF)?

The PLF is a percentage set by HUD that determines how much of your home value you can access. It depends on two things: the age of the youngest borrower and the expected interest rate. A higher age or lower interest rate gives you a higher PLF, which means more money available to you.

Why does the calculator use the younger borrower's age?

HECM rules require the PLF to be based on the age of the youngest borrower or co-borrower. Since a younger person is expected to live longer, the lender needs to account for a longer loan period. This results in a lower PLF and less money available upfront.

What is the expected interest rate and is it the same as my loan rate?

No, they are not the same. The expected interest rate is used by HUD only to look up your Principal Limit Factor. It is typically based on the 10-year CMT rate plus the lender's margin. Your actual loan rate may be different and can be fixed or adjustable.

What is the initial MIP and why is it 2%?

The initial Mortgage Insurance Premium (MIP) is a one-time fee of 2% of your home value or the FHA cap, whichever is lower. It goes to the FHA to insure your loan. This fee protects you by guaranteeing you will receive your loan funds even if the lender goes out of business.

What is the ongoing MIP charge?

The ongoing MIP is an annual charge of 0.5% of your outstanding loan balance. It is added to your loan balance each month. This insurance protects both you and the lender by ensuring the loan is a non-recourse loan, meaning you will never owe more than the home is worth.

What is the difference between Gross Principal Limit and Net Principal Limit?

The Gross Principal Limit is the total amount calculated by multiplying your home value (or FHA cap) by the PLF. The Net Principal Limit is what remains after subtracting the initial MIP, estimated closing costs, and servicing set-aside fees. The net amount is what is actually available to you.

What are Net Available Proceeds?

Net Available Proceeds is the cash you actually receive after all costs are subtracted. It equals the Net Principal Limit minus any existing mortgage balance that must be paid off at closing. This is the money you can use freely.

What is the HECM for Purchase option?

HECM for Purchase lets you buy a new home using a reverse mortgage. Instead of getting a regular mortgage and making monthly payments, you make a larger down payment and the HECM covers the rest. You never have to make monthly mortgage payments on the new home.

How is the down payment calculated for HECM for Purchase?

The down payment equals the purchase price minus the HECM benefit. The HECM benefit is the Net Principal Limit based on the purchase price. Typically, buyers need to put down roughly 40% to 60% of the purchase price depending on their age and the interest rate.

What closing costs are included in the estimate?

The calculator estimates an origination fee (2% of the first $200,000 plus 1% of the rest, with a minimum of $2,500 and a maximum of $6,000) plus about $3,500 for other costs like appraisal, title insurance, and recording fees. Actual closing costs will vary by lender and location.

What is the servicing set-aside fee?

The servicing set-aside is money reserved from your principal limit to cover future loan servicing costs. The lender charges a monthly servicing fee (around $35) and sets aside enough to cover this fee for many years. This reduces the cash available to you at closing.

What home appreciation rate does the projection use?

The year-by-year projection assumes your home grows in value by 3% each year. This is a general estimate. Your actual home appreciation could be higher or lower depending on your local housing market and economic conditions.

What do the additional draws mean in the calculator?

Additional draws represent ongoing money you take from your reverse mortgage over time, such as monthly tenure payments or line-of-credit withdrawals. Enter the dollar amount per period and select how often you plan to draw. These amounts increase your loan balance over time.

Can my loan balance grow larger than my home value?

Yes, over many years the loan balance can exceed your home's value because interest and MIP fees compound. However, HECM loans are non-recourse, which means you or your heirs will never owe more than the home is worth when the loan is repaid. The FHA insurance covers any shortfall.

What does the compounding frequency setting do?

Compounding frequency controls how often interest is calculated and added to your loan balance. Standard HECM loans compound monthly, which means interest is added to your balance 12 times per year. More frequent compounding causes the balance to grow slightly faster.

Is my personal data stored when I use this calculator?

No. All calculations happen in your web browser. Nothing is sent to a server, stored, or shared. Your information stays completely private on your device.

How accurate are these reverse mortgage estimates?

This calculator provides reasonable estimates based on standard HECM guidelines and an approximated PLF table. Actual amounts will vary based on your lender, exact HUD PLF tables, local closing costs, and your specific financial situation. Always consult a HUD-approved counselor and lender for exact numbers.

What happens to remaining equity in my home?

Any equity left after the loan is repaid belongs to you or your heirs. For example, if your home sells for $400,000 and your loan balance is $250,000, the remaining $150,000 goes to you or your estate. The projection table shows estimated remaining equity for each year.