Reverse Mortgage Calculator
Calculate how much you could receive with a reverse mortgage based on your age, home value, and current interest rates.
Calculate Your Reverse Mortgage
What is a Reverse Mortgage?
A reverse mortgage is a financial product for homeowners aged 62 and older that allows them to convert part of their home equity into cash, a fixed monthly payment, or a line of credit. Unlike a traditional mortgage where you make payments to a lender, in a reverse mortgage, the lender pays you. The loan is repaid when the borrower moves out, sells the home, or passes away.
Home Equity Conversion
Convert your home equity into cash without selling your home while maintaining ownership.
No Monthly Payments
Unlike traditional mortgages, you don't need to make monthly mortgage payments.
Growing Line of Credit
The unused portion of a line of credit grows over time, increasing your available funds.
Types of Reverse Mortgages
There are three main types of reverse mortgages, each serving different needs and situations:
Home Equity Conversion Mortgage (HECM)
The most common type, HECMs are federally-insured reverse mortgages backed by the U.S. Department of Housing and Urban Development (HUD).
- Federally regulated with borrower protections
- Maximum loan limits ($1,089,300 in 2023)
- Requires financial counseling before approval
- Multiple payment options available
Proprietary Reverse Mortgages
Private loans by companies that are not federally insured, typically for higher-value homes above the HECM limit.
- Can provide larger loan amounts for high-value homes
- Not federally insured, fewer regulatory protections
- Terms vary by lender
Single-Purpose Reverse Mortgages
Offered by some state and local government agencies and nonprofit organizations, typically for a specific purpose.
- Lowest-cost option
- Limited eligibility (usually lower-income homeowners)
- Funds can only be used for specified purposes (home repairs, property taxes, etc.)
How a Reverse Mortgage Works
Eligibility Requirements
- Borrower must be at least 62 years old
- Own your home outright or have a low mortgage balance
- Home must be your primary residence
- Property must meet FHA standards
- Must meet financial eligibility criteria
- Complete HUD-approved counseling
Payment Options
Lump Sum
One-time payment at a fixed interest rate
Tenure
Equal monthly payments as long as one borrower lives in the home
Term
Equal monthly payments for a fixed period
Line of Credit
Draw funds as needed, with unused amounts growing over time
Modified Tenure/Term
Combination of line of credit with monthly payments
Costs & Fees
Understanding the costs associated with reverse mortgages is crucial to determining if it's the right financial solution for you. While these loans provide access to home equity without monthly payments, they do come with various fees:
Mortgage Insurance Premium (MIP)
For HECMs, you'll pay an upfront MIP of 2% of the home's appraised value (or FHA limit, whichever is less), plus an annual MIP of 0.5% of the outstanding loan balance.
Origination Fee
Lenders charge an origination fee that can range from $2,500 to $6,000, depending on your home's value. The fee is typically 2% of the first $200,000 of your home's value plus 1% of the value above $200,000, with a cap of $6,000.
Closing Costs
Similar to traditional mortgages, reverse mortgages include closing costs for services like appraisals, title searches, surveys, inspections, recording fees, and other closing services, typically ranging from $2,000 to $3,000.
Servicing Fees
Lenders may charge monthly servicing fees, typically around $30-$35, although many modern reverse mortgages have eliminated or reduced these fees.
Interest
The loan accrues interest over time, which is added to the loan balance. Rates can be fixed or variable, depending on the payment option you choose.
Pros and Cons of Reverse Mortgages
Advantages
- No monthly mortgage payments required
- Stay in your home and maintain ownership
- Use the funds for any purpose
- Non-recourse loan (you'll never owe more than the home's value)
- Multiple payment options to suit different needs
- Line of credit grows over time
- Social Security and Medicare benefits usually not affected
Disadvantages
- High upfront costs and fees
- Interest compounds over time, reducing home equity
- May affect eligibility for need-based programs like Medicaid
- Must maintain the home and pay property taxes and insurance
- Reduces inheritance for heirs
- Loan becomes due when you move out for more than 12 months
- Complexity can lead to misunderstandings
Who Should Consider a Reverse Mortgage?
Reverse mortgages can be beneficial for certain individuals, but they're not ideal for everyone. Consider a reverse mortgage if:
You plan to stay in your home long-term. Reverse mortgages have high upfront costs, so they generally make more sense if you plan to stay in your home for several years.
You need to supplement retirement income. If you're on a fixed income and need additional funds for daily expenses or healthcare costs.
You want to age in place. If you need funds to modify your home for aging or to pay for in-home care.
You have limited retirement savings. If most of your wealth is tied up in your home equity.
You don't have mortgage payments, or can pay off your current mortgage. A reverse mortgage must be in first lien position, so any existing mortgage must be paid off.
A Reverse Mortgage May Not Be Right If:
- You plan to move in the near future
- You want to leave your home to your heirs
- You have other lower-cost options available
- You cannot afford property taxes, insurance, and home maintenance
- You rely on means-tested government benefits that could be affected
Real-World Example
Case Study: Meeting Retirement Needs
Consider Martha, a 75-year-old widow living in a home valued at $350,000 with no mortgage. On a fixed income of $1,800 monthly from Social Security, she struggles with healthcare costs and home maintenance.
Martha's Financial Situation:
- Home Value: $350,000
- Existing Mortgage: $0
- Age: 75
- Monthly Income: $1,800
- Monthly Expenses: $2,200
Reverse Mortgage Solution:
- Martha qualifies for a HECM reverse mortgage with a principal limit of approximately $175,000 (50% of her home value)
- After paying closing costs and fees of about $15,000, she has $160,000 available
- She chooses a tenure payment option, receiving about $900 per month for as long as she lives in the home
- This additional income bridges her monthly shortfall and provides a small cushion for emergencies
This arrangement allows Martha to stay in her home comfortably without financial stress. She maintains ownership of her home while accessing her equity to improve her quality of life.
Alternatives to Consider
Before deciding on a reverse mortgage, explore these alternatives that might better suit your financial needs:
Home Equity Loan or HELOC
Traditional home equity loans or lines of credit typically have lower fees than reverse mortgages but require monthly payments. They're good options if you need a lump sum or access to funds for a specific purpose and can manage the monthly payments.
Use our Mortgage Calculator to estimate payments.
Refinancing
If interest rates have dropped since you got your mortgage, refinancing could lower your monthly payments and possibly allow you to take some cash out. This option works best if you can secure a significantly lower interest rate.
Downsizing
Selling your current home and moving to a less expensive one could free up equity while reducing maintenance costs, property taxes, and utilities. This option provides a clean break and potentially significant cash.
Our Prorated Rent Calculator can help if you're transitioning to renting.
Government Assistance Programs
Various federal, state, and local programs can help seniors with property taxes, utility bills, home repairs, and other expenses. These include property tax exemptions for seniors, energy assistance programs, and home modification grants.
Related Calculators
Explore these related calculators to help with other financial decisions:
Frequently Asked Questions About Reverse Mortgages
Important Disclaimer
This calculator was built using AI technology and, while designed to be accurate, may contain errors. Results should not be considered as the sole source of truth for important calculations. Always verify critical results through multiple sources and consult with qualified professionals when necessary.