Reverse Mortgage Calculator

How This Reverse Mortgage Calculator Works

This reverse mortgage calculator estimates how much of your home equity you might be able to convert into cash through a Home Equity Conversion Mortgage (HECM). It uses a simplified model of the FHA reverse mortgage program based on your home value, the youngest borrower’s age, an expected interest rate, and any existing mortgage balances or estimated closing costs.

The results are educational estimates only. Lenders use official FHA principal limit factor tables, detailed underwriting, and current market data, so your actual offer will differ from the figures shown here.

Key Factors That Affect Your Available Cash

• Home value (V): Higher appraised values generally allow for a higher potential reverse mortgage amount, up to FHA loan limits.
• Youngest borrower age (A): The program is designed for older homeowners. The older the youngest borrower, the larger the share of equity that may be available.
• Expected interest rate (R): Higher rates reduce the amount you can borrow because interest will accumulate faster over time.
• Existing mortgage balance (M): Any current mortgage or home equity loan on the property must usually be paid off first using reverse mortgage proceeds.
• Closing costs and fees (C): Upfront costs reduce the net cash you can take home.

Formulas Used in This Calculator

The calculator first estimates a principal limit factor (PLF), which is the percentage of your home’s value that may be available as a reverse mortgage. Then it subtracts your existing mortgage balance and estimated closing costs to arrive at an approximate cash amount.

The overall cash estimate can be written as:

Where:

• V = home value
• PLF = principal limit factor (a percentage between 0 and 1)
• M = existing mortgage balance
• C = estimated closing costs and upfront fees

The principal limit factor itself is modeled as:

This is a simplified representation of how age and interest rates affect borrowing power. It is not the official FHA factor, but it often gives a reasonable first estimate.

Worked Example

Suppose you enter the following in the calculator:

• Home value (V): $400,000
• Youngest borrower age (A): 72
• Expected interest rate (R): 4.5%
• Existing mortgage balance (M): $50,000
• Estimated closing costs (C): $10,000

First, estimate the principal limit factor:

• Age adjustment: 0.01 × (72 − 62) = 0.10
• Rate adjustment: 0.02 × (4.5 − 4) = 0.01
• PLF (before caps): 0.50 + 0.10 − 0.01 = 0.59
• After applying the 0.35–0.75 bounds, PLF stays at 0.59 (59%).

Next, calculate the estimated cash:

• Maximum reverse mortgage amount: 0.59 × $400,000 = $236,000
• Minus existing mortgage balance: $236,000 − $50,000 = $186,000
• Minus closing costs: $186,000 − $10,000 = $176,000 (estimated cash available)

The calculator performs this type of math instantly using your own numbers, but your lender may quote a different amount based on real FHA tables, your property type, location, and up-to-date interest rates.

Interpreting Your Results

When you run the calculator, you will typically see an estimated cash amount and an implied principal limit factor. Use these results as a directional guide rather than a promise.

• Higher available cash often means you are older, have higher home equity, and/or are using a lower expected interest rate.
• Lower or zero available cash may indicate that your existing mortgage balance and costs consume most of the available principal limit, or that your age and rate combination yields a relatively low PLF.
• Negative results (where costs and existing debt exceed the modeled principal limit) suggest that a HECM might not work without paying down your current mortgage balance or reassessing assumptions with a lender.

Remember that a reverse mortgage is still a loan. Interest and mortgage insurance premiums accrue over time, increasing the balance and reducing remaining home equity.

Who Typically Qualifies for a HECM Reverse Mortgage?

While this calculator focuses on the numbers, eligibility is just as important. Common FHA HECM requirements include:

• At least one borrower aged 62 or older.
• The home is your primary residence (you live there most of the year).
• The property is an eligible type, such as a single-family home, certain condos, or a 2–4 unit property where you occupy one unit.
• You complete HUD-approved counseling before closing.
• You stay current on property taxes, homeowners insurance, and required maintenance.

Meeting these criteria does not guarantee approval, but they are a starting point for deciding whether to speak with a lender or counselor.

Reverse Mortgage vs. Other Ways to Tap Home Equity

This calculator only models a reverse mortgage. It can be helpful to compare it with other options conceptually:

Assumptions, Limitations, and Disclaimers

This tool is designed to be transparent about its simplifications:

• Simplified PLF model: The calculator uses a modeled principal limit factor instead of official FHA HECM tables. Actual PLFs depend on age, current principal limit factors published by HUD, interest rate structures, and loan type.
• Excluded details: The estimate does not fully account for ongoing mortgage insurance premiums, servicing fees, set-asides for taxes and insurance, repairs required by the lender, or interest-rate caps on adjustable products.
• Property and location: FHA county loan limits, property type, and local rules can significantly affect what you can borrow.
• Timing: Program rules and rate environments change. This calculator reflects general HECM concepts as of its creation date and may become outdated.
• No financial or legal advice: Results are estimates only, not a loan offer, prequalification, or personalized financial advice.

Before making decisions, discuss your situation with a HUD-approved reverse mortgage counselor or a trusted financial professional. You can find counseling resources through the U.S. Department of Housing and Urban Development (HUD).

How to Use This Estimate and Next Steps

Once you have an estimated cash amount:

• Use it as a starting point for conversations with lenders and advisors.
• Ask potential lenders how your quote might differ from this calculator, how interest will accrue, and what protections apply to non-borrowing spouses or heirs.
• Consider whether you can comfortably keep up with taxes, insurance, and maintenance, since failing to do so can lead to foreclosure even with a reverse mortgage.

A reverse mortgage can be helpful for some households and a poor fit for others. Comparing this estimate against alternatives like downsizing, a HELOC, or other retirement income strategies can help you choose the option that best aligns with your long-term goals.