Reverse Mortgage Calculator
Estimate what a HECM reverse mortgage releases after costs and the existing mortgage is repaid, and how the balance grows against your equity over time.
How to use this calculator
- 1Enter your home value, any existing mortgage that must be repaid, and the age of the youngest borrower.
- 2Ask your lender for your principal limit factor from the HUD table and enter it — it is the number that drives everything.
- 3Enter expected upfront costs and the rate quoted.
- 4Look at the balance-against-value table: the point where the two cross is when equity for your heirs runs out.
How the calculation works
Principal limit = min(home value, FHA limit) × principal limit factor. Available = principal limit − existing mortgage − upfront costs. Balance grows at the note rate, compounded- principal limit factor
- The share of value HUD allows, determined by the youngest borrower's age and the expected rate
- FHA limit
- A national cap on the value that can be counted, regardless of what the home is worth
The principal limit factor is taken from a HUD table by age and expected rate, and it is not a formula that can be reproduced here. It is entered as an input rather than guessed, because presenting an invented factor as authoritative would misstate the single most important number in the calculation — ask your lender for your exact figure.
No payments are made, so interest and the ongoing mortgage insurance premium accrue and compound. This is why the balance grows quickly, and why the projection compares it directly against the home's value.
A HECM is non-recourse. Neither the borrower nor the estate ever owes more than the home is worth — repayment is capped at the lesser of the balance or 95% of appraised value at the time it becomes due.
Worked example
A $500,000 home at age 70 with $80,000 owed
- 1.The principal limit is 45% of $500,000 = $225,000.
- 2.From that, $80,000 clears the existing mortgage and $14,000 covers upfront costs.
- 3.That leaves $131,000 available as a lump sum, line of credit or monthly payments.
- 4.The balance starts at $225,000 and compounds at 7.5% with nothing repaid, so it roughly doubles every decade.
Result: $131,000 released, from $225,000 of borrowing capacity
How a reverse mortgage works
A Home Equity Conversion Mortgage is a federally insured loan for homeowners aged 62 and over that converts equity into cash without requiring monthly payments. Interest and insurance premiums accrue onto the balance, and the loan becomes due when the last borrower dies, sells, or stops using the home as their principal residence for twelve consecutive months.
How much can be borrowed is set by the principal limit factor — a percentage from a HUD table determined by the youngest borrower's age and the expected interest rate. Older borrowers and lower rates produce higher factors. Typical figures run from around 40% at 62 to over 60% in the eighties, applied to the lesser of the home's value and the national FHA lending limit.
Any existing mortgage must be paid off from the proceeds first, which is why someone with a substantial remaining loan may find little or nothing is released.
The protections, and the real risks
Reverse mortgages carry genuine consumer protections that are often overlooked in criticism of them, alongside genuine risks that are often glossed over in marketing.
- Non-recourse is real — neither you nor your estate can ever owe more than the home is worth. If the balance exceeds the value, FHA insurance covers the shortfall — which is what the insurance premium pays for.
- Counselling is mandatory — every borrower must complete a session with a HUD-approved counsellor before applying. It is genuinely useful and worth treating as more than a formality.
- The line of credit grows — an unused HECM credit line grows at the note rate, which means establishing one early and leaving it untouched increases future borrowing capacity. It is one of the few genuinely powerful planning uses of the product.
- You still owe taxes, insurance and upkeep — this is the most common cause of reverse mortgage foreclosure. The loan removes the mortgage payment, not the cost of owning a home.
- Costs are high — the initial mortgage insurance premium, origination fee and closing costs commonly total 5% or more of the home's value, and they are usually financed — so they accrue interest for the life of the loan.
- Moving out ends it — if you move to assisted living for more than twelve consecutive months, the loan becomes due. For someone whose health is likely to require that, this is a serious consideration.
Who it suits, and who it does not
The product fits a specific situation: someone who intends to stay in their home for the long term, has substantial equity and limited other income, and either needs cash flow or wants a standby credit line as a buffer against sequence-of-returns risk in a retirement portfolio.
It fits poorly for someone likely to move within a few years, because the high upfront costs are amortised over a short period. It also fits poorly for someone whose main objective is leaving the home to their children, since the compounding balance steadily consumes the equity that would have been inherited.
Two cheaper alternatives are worth ruling out first. Downsizing releases equity without any of the costs or compounding, and a home equity line of credit is far cheaper to establish — though it requires income qualification and monthly payments, which is exactly what a reverse mortgage borrower usually cannot manage.
What this assumes, and where it stops
Assumptions
- The principal limit factor entered is the correct one from the current HUD table for the borrower's age and expected rate.
- Upfront costs are financed into the loan rather than paid in cash.
- The full principal limit is drawn at closing, which maximises the balance projection — a line of credit drawn gradually accrues less.
- Interest and insurance premiums accrue monthly at the constant rate entered.
Limitations
- The principal limit factor is an input, not a calculated value. HUD publishes it in a table by age and expected rate, and your lender must supply your exact figure.
- The ongoing mortgage insurance premium is not separated out; include it in the rate for a fuller picture of balance growth.
- Servicing fees, and the different draw options — lump sum, tenure payments, line of credit — are not modelled separately.
- This is a significant and hard-to-reverse decision. HUD-approved counselling is mandatory before applying, and worth taking seriously.
Common questions
Can I owe more than my house is worth?
No. A HECM is non-recourse, so neither you nor your estate can ever owe more than the home's value. If the balance exceeds what the home sells for, FHA insurance covers the difference — that is what the mortgage insurance premium pays for. When the loan becomes due, heirs can repay the lesser of the full balance or 95% of the appraised value to keep the home, or sell it and keep any surplus.
How much can I actually borrow?
It depends on the principal limit factor, a percentage set by HUD according to the youngest borrower's age and the expected interest rate — commonly 40% to 60% of the home's value, applied to the lesser of the value and the national FHA lending limit. Any existing mortgage must be repaid from the proceeds first, along with upfront costs, so the cash actually released can be considerably less than the headline principal limit.
Can I lose my home with a reverse mortgage?
Yes, in specific circumstances. You must keep the property as your principal residence, and stay current on property taxes, homeowners insurance and required maintenance. Failing to do so is the most common cause of reverse mortgage foreclosure. The loan also becomes due if you move out for more than twelve consecutive months — which includes a long-term move into assisted living.
What happens to my heirs?
When the loan becomes due, heirs can repay the balance and keep the home, sell it and keep any equity above the balance, or hand it back with no further liability because the loan is non-recourse. What they will not receive is the equity the accruing balance has consumed. If leaving the home to your children is a priority, the compounding balance shown in the table above is the figure to look at.
Sources
- Home Equity Conversion Mortgages for Seniors — US Department of Housing and Urban Development
- Reverse Mortgages: What to know — US Consumer Financial Protection Bureau
Formula and content last reviewed on .
Results are estimates for information only, not professional advice.
Related calculators
Tools people commonly use alongside the reverse mortgage calculator.