Reverse Mortgage Calculator
Estimate reverse mortgage proceeds from age, home value, and interest rate. Enter values for instant results with step-by-step formulas.
Formula
Net Proceeds = (Home Value x PLF) - Mortgage Balance - Upfront Costs
Where PLF (Principal Limit Factor) is determined by borrower age and interest rate, Home Value is capped at the FHA lending limit, and Upfront Costs include origination fee, mortgage insurance premium, and closing costs.
Worked Examples
Example 1: 70-Year-Old Homeowner with Paid-Off Home
Problem: A 70-year-old with a home worth $400,000, no existing mortgage, at a 6.5% interest rate wants to know their reverse mortgage proceeds.
Solution: Age factor = 0.25 + (70-62) x 0.012 = 0.346\nRate factor = max(0.40, 1 - 0.065 x 1.2) = 0.922\nPLF = 0.346 x 0.922 = 0.319 (31.9%)\nPrincipal Limit = $400,000 x 0.319 = $127,600\nOrigination fee = $400,000 x 0.02 = $6,000 (capped)\nMIP = $400,000 x 0.02 = $8,000\nClosing costs = $3,500\nNet Proceeds = $127,600 - $0 - $17,500 = $110,100
Result: Net Proceeds: $110,100 as lump sum or ~$545/month tenure payment
Example 2: 75-Year-Old with Existing Mortgage
Problem: A 75-year-old with a home worth $300,000, $80,000 remaining mortgage at 6.5% interest rate.
Solution: Age factor = 0.25 + (75-62) x 0.012 = 0.406\nRate factor = max(0.40, 1 - 0.065 x 1.2) = 0.922\nPLF = 0.406 x 0.922 = 0.374 (37.4%)\nPrincipal Limit = $300,000 x 0.374 = $112,200\nUpfront costs = $6,000 + $6,000 + $3,500 = $15,500\nNet Proceeds = $112,200 - $80,000 - $15,500 = $16,700
Result: Net Proceeds: $16,700 after paying off existing mortgage and fees
Frequently Asked Questions
How much money can I get from a reverse mortgage?
The amount you can receive from a reverse mortgage depends on several key factors including your age, the appraised value of your home, current interest rates, and the FHA lending limit. The principal limit factor (PLF) determines the percentage of your home value you can access, and it increases with age while decreasing with higher interest rates. Generally, a 70-year-old might access 40-55% of their home value, while an 80-year-old might access 50-65%. The maximum claim amount is capped at the FHA limit, currently $1,089,300. After subtracting any existing mortgage balance, upfront costs, and fees, the remaining amount represents your net available proceeds. Getting quotes from multiple lenders is recommended to compare actual amounts.
What are the costs and fees associated with reverse mortgages?
Reverse mortgages carry several costs that reduce the amount of money you ultimately receive. The origination fee is capped at $6,000 and is typically 2% of the home value up to $200,000 plus 1% of the value above that. The initial mortgage insurance premium (MIP) is 2% of the maximum claim amount, and an annual MIP of 0.5% is added to the loan balance each year. Third-party closing costs include appraisal fees, title search, inspections, and recording fees, typically totaling $2,500 to $5,000. Servicing fees may also apply monthly. These upfront costs can be financed into the loan rather than paid out of pocket, but doing so reduces your available proceeds and increases the loan balance that accrues interest over time.
What happens to my home when the reverse mortgage becomes due?
A reverse mortgage becomes due and payable when the last surviving borrower passes away, sells the home, or permanently moves out of the property. At that point, the borrower or their heirs have several options. They can sell the home and use the proceeds to repay the loan, with any remaining equity going to the borrower or heirs. If the loan balance exceeds the home value, the FHA insurance covers the difference, so neither the borrower nor heirs owe more than the home is worth. This non-recourse feature protects borrowers from owing more than their home value. Heirs can also choose to keep the home by paying off the loan balance or 95% of the appraised value, whichever is less.
Is a reverse mortgage a good idea for retirement planning?
Whether a reverse mortgage is a good idea depends entirely on your individual financial situation, goals, and alternatives. Reverse mortgages can be beneficial for seniors who are house-rich but cash-poor, need to supplement retirement income, want to age in place, or need to cover healthcare expenses. However, they are not ideal if you plan to move soon, want to leave your home to heirs free of debt, or have other less expensive sources of funds available. The costs of a reverse mortgage are front-loaded and significant, making them more cost-effective for borrowers who plan to stay in the home for a longer period. Consulting with a HUD-approved counselor is required before obtaining a HECM and is strongly recommended to understand all implications fully.
What credit score do I need for the best mortgage rates?
A FICO score of 760 or higher typically qualifies you for the lowest advertised mortgage rates. Dropping from 760 to 700 can cost you 0.25-0.50% more in interest — on a $400,000 30-year loan, that difference costs roughly $60-$120 more per month and over $25,000 in extra interest. Scores between 620-699 still qualify for conventional loans but at noticeably higher rates. Scores below 580 generally require FHA loans, which accept down payments as low as 3.5% but mandate mortgage insurance for the life of the loan. Before applying, pay down revolving balances to below 30% of credit limits — this alone can boost your score 20-40 points.
How do mortgage points work?
Mortgage discount points are prepaid interest you pay at closing to permanently reduce your loan's interest rate. One point costs 1% of the loan amount — on a $350,000 mortgage, one point costs $3,500 — and typically lowers your rate by 0.20-0.25%. To determine whether buying points makes sense, calculate your break-even period: divide the upfront cost by your monthly savings. For example, $3,500 paid to save $55/month breaks even in about 64 months (5.3 years). If you plan to stay in the home beyond that point, buying points saves money. If you may sell or refinance sooner, keep the cash. Points are tax-deductible in the year of purchase for a primary residence.