How does this reverse mortgage calculator work?

This calculator estimates a simplified reverse mortgage based on your home value, age, interest rate, and fees. It applies a loan-to-value factor that increases with age, subtracts existing mortgage debt and upfront costs, and then projects how your loan balance and remaining equity could change over time under different home price growth assumptions.

Is a reverse mortgage a good idea?

A reverse mortgage can be helpful for some older homeowners who want to stay in their home and need extra income, but it is not right for everyone. It reduces the equity you and your heirs will have, can be expensive due to fees and interest, and may affect eligibility for some means-tested benefits. It is important to compare alternatives such as downsizing, a home equity line of credit, or other income sources, and to speak with a HUD-approved housing counselor.

What are the main costs of a reverse mortgage?

Common costs include an origination fee, upfront and annual mortgage insurance premiums for HECM loans, third-party closing costs (appraisal, title, recording), and ongoing interest that accrues on the outstanding balance. Many of these costs are financed into the loan, which increases the balance and reduces your remaining equity over time.

Reverse Mortgage Calculator

Estimate how much you might be able to borrow with a reverse mortgage, how interest and fees grow over time, and how much home equity you could have left in the future.

This is an educational tool based on simplified HECM-style assumptions. It is not a quote or legal/financial advice.

Reverse mortgage inputs

Current home value ($)

Existing mortgage balance ($)

Any existing mortgage must usually be paid off with reverse mortgage proceeds.

Age of youngest borrower (years)

Most HECM loans require age 62+, but we allow a wider range for modeling.

Expected interest rate (APR, %)

Includes margin + index; does not include annual MIP.

Upfront financed costs ($)

Origination, upfront MIP, closing costs that are rolled into the loan.

Annual ongoing costs financed ($)

E.g., annual MIP or servicing fee added to the balance.

Assumed home price growth (% per year)

Years to project

Payout type

Lump sum at closing Line of credit (modeled as equal annual draws)

For line of credit, we assume you draw evenly over the projection period.

Results overview

Estimated principal limit

Approximate maximum borrowing capacity based on age and home value.

Net proceeds available now

After paying off existing mortgage and upfront financed costs.

Loan balance after projection

Estimated balance owed at the end of the selected period.

Home value after projection

Based on your assumed annual home price growth rate.

Estimated remaining equity

Home value minus loan balance (cannot go below $0 in a non-recourse HECM).

Year‑by‑year projection

Values are approximate and rounded.

Year	Age	Home value	Loan balance	Equity	Draw this year	Interest + fees
Run the calculator to see a projection.

How this reverse mortgage calculator works

This tool models a simplified, HECM-style reverse mortgage. It is designed to help you understand the trade‑offs between cash today and home equity later, not to replicate any specific lender’s underwriting.

1. Estimating the principal limit (how much you can borrow)

Real HECM reverse mortgages use HUD principal limit factors that depend on age, interest rate, and expected mortgage insurance premiums. To keep things transparent, we approximate those factors with a simple age‑based formula:

Step 1 – Age‑based loan‑to‑value (LTV) factor

We approximate the maximum LTV as increasing with age, capped at 60%:

$ \text{LTV} \approx 0.20 + 0.01 \times (\text{Age} - 62) $ (clamped between 0.20 and 0.60)

Step 2 – Principal limit

$ \text{Principal limit} = \text{Home value} \times \text{LTV} $

This is intentionally conservative for younger borrowers and more generous for older borrowers, but it will not match HUD’s exact tables. Use it as a ballpark estimate only.

2. Accounting for existing mortgage and upfront costs

Any existing mortgage must usually be paid off at closing. Many upfront costs are also financed into the loan.

Net proceeds available at closing

$ \text{Net proceeds} = \text{Principal limit} - \text{Existing mortgage} - \text{Upfront financed costs} $

If this number is negative, it means the reverse mortgage would not fully pay off your existing mortgage under these assumptions.

3. Modeling interest, fees, and home price growth

Each year, the calculator compounds interest on the outstanding balance, adds any ongoing financed costs, and (for a line of credit scenario) adds that year’s draw. At the same time, it grows your home value by your chosen appreciation rate.

Loan balance update (per year)

$ B_{t+1} = B_t \times (1 + r) + C_{\text{annual}} + D_t $

$ B_t $ = loan balance at start of year $ t $
$ r $ = annual interest rate (APR, as a decimal)
$ C_{\text{annual}} $ = annual ongoing financed costs
$ D_t $ = draw taken in year $ t $ (0 after initial lump sum, or equal annual draws for line of credit)

Home value update (per year)

$ V_{t+1} = V_t \times (1 + g) $

$ V_t $ = home value at start of year $ t $
$ g $ = annual home price growth rate (as a decimal)

Equity

$ \text{Equity}_t = \max(0, V_t - B_t) $

4. Lump sum vs. line of credit

Lump sum: We assume you take all available net proceeds at closing. The balance then grows with interest and fees only.
Line of credit: We assume you draw the available net proceeds evenly over the projection period. In reality, HECM lines of credit can grow over time; we do not model that advanced feature here.

Key risks and protections with reverse mortgages

The official resources you provided (CFPB, FTC, HUD, and others) highlight several important points that this calculator cannot fully capture:

Non‑recourse protection: With federally insured HECM loans, you or your heirs will never owe more than the home’s value when it is sold to repay the loan.
Ongoing obligations: You must keep paying property taxes, homeowners insurance, HOA dues, and maintain the home. Failure to do so can lead to foreclosure even if you never miss a loan payment (because there are none).
Impact on heirs: A reverse mortgage reduces the equity your heirs may inherit. They can usually choose to sell the home, pay off the loan and keep the home, or walk away if the balance exceeds the home’s value.
Complex fees and rules: Real HECM loans have detailed rules about initial disbursement limits, mandatory counseling, mortgage insurance premiums, and protections for non‑borrowing spouses.

Always review official guidance from CFPB and HUD, and consider speaking with a HUD‑approved housing counselor before committing.

When a reverse mortgage might make sense

You are an older homeowner who wants to stay in your home long‑term.
You have significant home equity but limited liquid savings or income.
You understand that your heirs will likely receive less (or no) home equity.
You can reliably afford property taxes, insurance, and maintenance.

Alternatives to consider

Selling and downsizing to a less expensive home.
Taking a traditional home equity line of credit (HELOC) or home equity loan.
Renting out part of your home or exploring other income sources.
Using other savings or benefits before tapping home equity.

Limitations and disclaimers

This calculator is for education only and does not provide financial, legal, or tax advice.
Actual reverse mortgage terms depend on lender, program type, interest rates, HUD rules, and your detailed profile.
We do not model all HECM rules (e.g., initial disbursement caps, MIP structures, line‑of‑credit growth, servicing set‑asides).

Reverse mortgage FAQ

What is a reverse mortgage?

A reverse mortgage is a loan that lets eligible homeowners (typically age 62+) convert part of their home equity into cash without making required monthly payments. The loan balance grows over time as interest and fees accrue. It is usually repaid when you move out permanently, sell the home, or die.

Can I owe more than my home is worth?

With federally insured HECM reverse mortgages, the loan is non‑recourse. That means you or your heirs will never owe more than the home’s value when it is sold to repay the loan. If the balance exceeds the value, FHA insurance covers the shortfall (subject to program rules).

What happens to a reverse mortgage when I die?

After you die (or the last surviving borrower dies), your heirs typically have a limited time to either repay the loan and keep the home, or sell the home and use the proceeds to pay off the loan. Any remaining equity after the loan is repaid goes to your estate. If the home sells for less than the balance on a HECM loan, FHA insurance covers the difference and your heirs are not personally liable.

Can I lose my home with a reverse mortgage?

Yes, foreclosure is possible if you fail to meet the loan’s ongoing obligations: paying property taxes, homeowners insurance, HOA dues, and maintaining the home. There are also occupancy requirements—you must live in the home as your principal residence. Falling behind on these obligations can trigger default even if you never miss a loan payment.

Does a reverse mortgage affect Social Security or Medicare?

Reverse mortgage proceeds generally do not affect Social Security retirement or Medicare benefits. However, they can affect eligibility for means‑tested programs such as Medicaid or Supplemental Security Income (SSI) if the funds are not spent promptly and increase your countable assets. Speak with a benefits specialist before proceeding.