Reverse Mortgage Calculator
Estimate your reverse mortgage proceeds instantly — including principal limit, available funds, monthly payment, credit line, and a full equity projection. No personal information required.
| Year | Home Value | Loan Balance | Remaining Equity | Equity % |
|---|
What Is a Reverse Mortgage?
A reverse mortgage is a type of home loan available to homeowners aged 62 and older that allows you to convert a portion of your home equity into cash — without selling your home or making monthly mortgage payments.
Unlike a conventional mortgage where you pay the lender each month, a reverse mortgage works in reverse: the lender pays you (as a lump sum, monthly payments, or a line of credit), and the loan balance grows over time. The loan becomes due when you sell the home, move out permanently, or pass away.
The most common type is the Home Equity Conversion Mortgage (HECM), which is federally insured by the Federal Housing Administration (FHA). Proprietary (jumbo) reverse mortgages from private lenders also exist for higher-value homes.
How This Reverse Mortgage Calculator Works
This reverse mortgage estimator uses a simplified approximation of the HUD principal limit factor (PLF) — the percentage of your home's value that can be converted to loan proceeds. The PLF is primarily driven by age and the expected interest rate.
The projection then compounds the loan balance at your entered interest rate while growing the home value at your entered appreciation rate year by year. Remaining equity = projected home value − projected loan balance.
What Affects Reverse Mortgage Proceeds?
Age of Youngest Borrower
The older the youngest borrower, the higher the principal limit factor — meaning older borrowers can access more of their home's value. A 75-year-old typically qualifies for more than a 62-year-old with the same home value.
Home Value
Higher home values produce larger principal limits, up to the FHA lending limit (currently $1,149,825 for 2024). Values above this limit do not increase the HECM amount, though proprietary loans may accommodate higher values.
Existing Mortgage Balance
Any existing mortgage or lien must be paid off using reverse mortgage proceeds at closing. A large mortgage balance reduces the net cash you receive.
Interest Rate
Higher expected interest rates reduce the principal limit. Lower rates allow a higher percentage of home value to be accessed. The rate used in HECM calculations is the "expected rate," which reflects long-term interest rate expectations.
Closing Costs and Fees
Origination fees, MIP (mortgage insurance premium), appraisal, title, and other closing costs are deducted from proceeds. Typical HECM closing costs range from $5,000 to $15,000+ depending on home value.
Payout Option
Your chosen disbursement method (lump sum, monthly, credit line) affects how funds are structured. Monthly payments are calculated from the net available funds. The line of credit option grows over time at the loan's interest rate.
Reverse Mortgage Payment Options Explained
| Option | How It Works | Best For |
|---|---|---|
| Lump Sum | Receive all available funds at closing in a single payment. Only available at a fixed interest rate. | Paying off a large mortgage, major home repair, or one-time need |
| Monthly Tenure | Receive equal monthly payments for as long as you live in the home as your primary residence. | Supplementing retirement income indefinitely |
| Monthly Term | Receive equal monthly payments for a fixed number of months you choose. | Bridging a specific income gap for a set period |
| Line of Credit | Draw funds as needed up to your available limit, which grows over time at the loan's rate. | Emergency reserves, flexible spending, or long-term planning |
| Combination | Set aside a portion as a credit line and use the remainder for monthly payments. | Balancing steady income with access to reserves |
Reverse Mortgage Eligibility Basics
- Age: The youngest borrower (or eligible non-borrowing spouse) must be at least 62 years old.
- Primary Residence: The home must be your principal residence — you must live there for the majority of the year.
- Equity Requirement: You must own the home outright or have significant equity. Most lenders require at least 50% equity, though this varies with age and rates.
- Property Type: Single-family homes, HUD-approved condominiums, and certain manufactured homes qualify. Investment properties and vacation homes do not.
- HUD Counseling: You must complete a session with a HUD-approved housing counselor before applying for a HECM. This is a federal requirement and costs around $125–$200.
- Financial Assessment: Lenders evaluate your income, credit, and ability to maintain ongoing obligations (taxes, insurance, HOA fees).
- Ongoing Obligations: You must continue paying property taxes, homeowners insurance, and HOA fees. You must maintain the home in good condition. Failure to do so can trigger loan default.
Reverse Mortgage Pros and Cons
✓ Potential Benefits
- No monthly mortgage payments required
- Tax-free loan proceeds (consult a tax advisor)
- You retain home ownership
- Non-recourse loan — you never owe more than home value
- Line of credit grows over time if unused
- Can eliminate an existing mortgage payment
- Funds can improve retirement cash flow
✗ Potential Drawbacks
- Loan balance grows every year — equity declines
- Significant closing costs and ongoing MIP
- Reduces inheritance for heirs
- Loan due if you move, sell, or pass away
- Risk of default if you fail to pay taxes/insurance
- Fixed-rate lump sum has limited payout flexibility
- Proprietary products may have fewer consumer protections
Reverse Mortgage vs HELOC vs Home Equity Loan vs Cash-Out Refinance
| Feature | Reverse Mortgage | HELOC | Home Equity Loan | Cash-Out Refi |
|---|---|---|---|---|
| Monthly Payment | None required | Interest-only or P+I | Fixed P+I | Fixed P+I on full balance |
| Age Requirement | Must be 62+ | None | None | None |
| Loan Balance | Grows over time | Revolving | Amortizes down | Amortizes down |
| Home Ownership | Yes, retained | Yes | Yes | Yes |
| Income Requirement | Financial assessment | Standard underwriting | Standard underwriting | Standard underwriting |
| Best For | Retirees, cash flow | Flexible ongoing needs | One-time lump need | Rate reduction + cash |
| Risk | Equity erosion | Rate increases, payment shock | Payment obligation | Higher monthly payment |
Example Reverse Mortgage Calculations
Example 1: 70-Year-Old, $400K Home, $80K Mortgage
Example 2: 75-Year-Old, $600K Home, No Mortgage
Example 3: 68-Year-Old, $300K Home, $120K Mortgage
Example 4: 80-Year-Old, $500K Home, Line of Credit
Important Costs and Limitations
Typical HECM Fees
- Origination fee: Greater of $2,500 or 2% of first $200K + 1% above $200K, capped at $6,000
- Upfront MIP: 2% of home value (or FHA limit, whichever is less)
- Annual MIP: 0.5% of outstanding loan balance per year
- Appraisal: $400–$800
- Title, settlement, recording: $500–$2,000+
- HUD counseling: ~$125–$200
Why Estimates May Differ from Lender Quotes
- Actual PLFs are published by HUD and change with interest rates
- Lenders use a formal appraisal, not your estimate of home value
- Your financial assessment may affect eligibility or fund set-asides
- Variable-rate products (HECM ARM) use a different rate structure than fixed
- Lender-specific fees and servicer charges vary
- Life expectancy set-aside (LESA) may reduce available funds if required
