A reverse mortgage lets homeowners aged 62 or older turn the equity they have built up in their home into cash — without selling the house and without making a monthly mortgage payment. Instead of you paying the lender, the lender pays you. The loan (plus interest) is repaid when the last borrower leaves the home, sells, or passes away. This reverse mortgage calculator estimates how much you could qualify for, how much you keep after closing costs, and how the balance is likely to grow over time.
The most common product in the United States is the Home Equity Conversion Mortgage (HECM), insured by the Federal Housing Administration (FHA). A small private market of "proprietary" reverse mortgages serves high-value homes that exceed the FHA lending limit. Either way, the math starts with one number: the Principal Limit — the maximum amount the lender will advance you based on your home value, your age, and current interest rates.
How to Use
- Enter the Home Value — the current appraised value of the property. Lenders will order their own appraisal, but your best estimate is enough to size the loan.
- Set the Youngest Borrower Age. This matters because HECM underwriting uses the age of the youngest borrower; a younger borrower reduces the principal limit because the loan is expected to compound for more years.
- Type the Expected Interest Rate. HECM principal limits are sized off a long-run expected rate, not your initial adjustable-rate teaser. Use a rate around 6%–7% to stress-test.
- Add your estimated Closing Costs. HECM closing costs typically run $6,000–$15,000 and include an origination fee, the FHA mortgage insurance premium (MIP), title insurance, and third-party escrow fees. They are usually financed into the loan rather than paid out of pocket.
- Choose a Payout Option: a one-time lump sum, equal tenure monthly payments for as long as you live in the home, or a line of credit that grows over time.
The result card shows your Principal Limit, the Net Proceeds after closing costs, the equivalent monthly tenure payment, and the projected loan balance 10, 20, and 30 years out.
How the Principal Limit Is Calculated
The FHA publishes a Principal Limit Factor (PLF) table that depends on two inputs: the age of the youngest borrower and the expected interest rate. The older you are and the lower the rate, the higher the factor. As a rule of thumb, PLFs run roughly 0.30–0.75 of the appraised home value.
For a 72-year-old at a 6.5% expected rate, the PLF lands near 0.55. On a $400,000 home that gives a principal limit of:
$400,000 × 0.55 = $220,000
From that you subtract closing costs — say $8,000 — to reach net proceeds of $212,000. Because no payment is required, the outstanding balance compounds monthly. At a 6.5% rate, that $212,000 grows to roughly $405,000 in 10 years, $775,000 in 20 years, and $1.48 million in 30 years. That is why the choice of payout option and the timing of sale or move matter so much.
If the expected rate is 0%, the compounding term drops out: the balance simply stays flat at net proceeds, which is the zero-rate boundary case the engine tests.
Three Ways to Take the Money
- Lump sum — one large advance at closing, usually only available with a fixed-rate HECM. Best if you have a single large expense: paying off an existing forward mortgage, funding a home renovation, or covering a health-care outlay.
- Tenure payments — equal monthly payments for as long as you live in the home, no matter how long that is. This is the closest thing to a guaranteed lifetime income stream from housing equity.
- Line of credit — a revolving pool you draw on as needed. The unused portion grows at the loan's interest rate, so future borrowing power rises over time even if you never touch it.
You can also combine options: take a partial lump sum to clear an existing mortgage, and leave the rest as a growing line of credit.
Examples
Example 1 — The canonical HECM. A 72-year-old owns a $400,000 home free and clear. At a 6.5% expected rate the principal limit is about $220,000; after $8,000 of closing costs, net proceeds are $212,000. Choosing tenure converts that into roughly $631 per month for life. The balance climbs to ~$405,000 in 10 years as interest accrues.
Example 2 — A higher-value home. At age 75 with a $1,500,000 home and a 7.0% rate, the PLF is about 0.582, producing a principal limit of roughly $873,000. After $12,000 in closing costs, net proceeds are about $861,000 — enough to either pay off the remaining forward mortgage, fund long-term care, or set up a substantial line of credit.
Example 3 — The youngest-borrower effect. A 65-year-old on a $300,000 home at 6.0% sees a lower PLF (~0.47), for a principal limit near $141,000 and net proceeds of $135,000. Waiting seven more years until age 72 raises the PLF materially — which is why many advisers recommend waiting if cash flow allows.
FAQ
What is the minimum age for a reverse mortgage?
All FHA HECMs require every borrower on title to be at least 62 years old. If you are married and your spouse is under 62, the younger spouse can be a "non-borrowing spouse" and remain in the home after the older borrower leaves, but the principal limit is sized off the younger (lower) age — which is why the calculator asks for the youngest borrower's age.
How much can I get from a reverse mortgage?
Your maximum is the Principal Limit, which is the appraised home value multiplied by the FHA Principal Limit Factor (typically 30%–75%). The PLF rises with age and falls as interest rates rise. Closing costs, any amount needed to pay off an existing mortgage, and the FHA mortgage insurance premium are deducted before you see cash.
Do I have to make monthly payments on a reverse mortgage?
No. That is the defining feature. No monthly principal or interest payment is due as long as at least one borrower lives in the home, maintains it, and stays current on property taxes and homeowner's insurance. The loan becomes due when the last borrower permanently leaves the home, sells, or passes away.
What happens to the equity when the loan comes due?
The loan is repaid from the sale proceeds, or by the heirs refinancing or paying it off. HECM is a non-recourse loan: you (or your estate) can never owe more than the home is worth at the time of repayment. If the balance exceeds the home's value, the FHA mortgage insurance fund covers the shortfall.
Can I lose my house to a reverse mortgage?
You cannot be foreclosed simply because the balance grows beyond your equity. But you can be called due if you fail to pay property taxes, let homeowner's insurance lapse, neglect the home, or move out for more than 12 consecutive months (for example, into a nursing home). Keep the taxes, insurance, and up-to-date maintenance and the loan cannot be foreclosed on.
Are reverse mortgage closing costs tax-deductible?
Interest on a reverse mortgage is generally not deductible until the loan is actually repaid, and then only to the extent the home-mortgage interest limits apply. Origination fees, MIP, and title charges are not currently deductible in the year of closing. Confirm with a tax professional, because the rules depend on how the proceeds are used.
Disclaimer
This reverse mortgage calculator is provided for informational purposes only and does not constitute financial, lending, tax, or legal advice. Principal limit factors are simplified approximations of the FHA HECM table and actual offers depend on your lender, your credit, your home's appraised condition, and current program rules. Closing-cost and projected-balance figures are estimates. Always consult an FHA-approved HECM counselor and a licensed reverse mortgage professional before taking out a loan.