# Reverse Mortgage Calculator

> Estimate reverse mortgage (HECM) proceeds based on age, home value, and interest rates. See loan-to-value by age, total interest over time, and remaining equity projections.

**Category:** Finance
**Keywords:** reverse mortgage, HECM, home equity, senior, retirement, principal limit, equity, FHA
**URL:** https://complete.tools/reverse-mortgage-calculator

## How HECM Proceeds Are Calculated

The amount you can borrow through a HECM reverse mortgage is determined by the **Principal Limit**, which is calculated using three key factors:

1. **Your Age**: Older borrowers receive a higher percentage of their home value. The minimum eligible age is 62. A 75-year-old will generally receive more than a 65-year-old for the same home value.

2. **Home Value**: The FHA uses either your home's appraised value or the HECM loan limit (updated annually by FHA), whichever is lower. Higher home values yield larger principal limits, up to the FHA ceiling.

3. **Expected Interest Rate**: The rate used to calculate your principal limit is based on current market rates plus a lender margin. A lower expected interest rate results in a higher principal limit.

The **Principal Limit Factor (PLF)** is a decimal published by HUD that represents the percentage of the home's value you can access. For example, a PLF of 0.52 means you can access 52% of your home value. PLF tables are updated by FHA periodically.

**Net Proceeds** are what you actually receive after the loan pays off any existing mortgage balance. If you have a $300,000 principal limit but owe $75,000 on your current mortgage, your net proceeds are approximately $225,000.

## Fixed vs Adjustable Rate HECMs

**Fixed Rate HECM:**
- Interest rate stays the same for the life of the loan
- Funds disbursed as a single lump sum at closing
- Typically results in a lower principal limit than adjustable rate options
- Best for borrowers who need a large upfront amount and want payment certainty

**Adjustable Rate HECM:**
- Interest rate fluctuates based on an index (typically SOFR or CMT) plus a lender margin
- More flexible disbursement options: lump sum, monthly payments, line of credit, or a combination
- Line of credit grows over time if unused — a unique benefit of HECM
- Often allows access to more total funds over time compared to fixed rate
- Best for borrowers who want flexibility and may not need all funds immediately

Most financial advisors recommend the adjustable rate HECM for its flexibility, especially the line of credit option, which provides a growing emergency reserve.

## Equity Implications Over Time

Interest on a reverse mortgage compounds over time, meaning your loan balance grows each year even if you take no additional draws. This reduces the equity available to you or your heirs when the home is eventually sold.

**Example scenario for a $400,000 home:**
- Year 0: Principal limit of $220,000 (PLF of 55% at age 70)
- Year 10: Loan balance may have grown to approximately $310,000 due to interest
- Year 20: Loan balance could reach $450,000+

If home values appreciate (historically averaging 2-4% per year), that growth partially offsets the compounding interest. In rising real estate markets, homeowners often retain meaningful equity even after 20+ years. In stagnant or declining markets, the loan balance can exceed the home value — but HECM's non-recourse feature protects borrowers and heirs from owing more than the home is worth.

**Non-recourse protection** is a critical feature: if your loan balance exceeds your home's value when you sell, you or your estate only owe what the home sells for. The FHA insurance covers the lender's shortfall.

## Eligibility Requirements

To qualify for a HECM reverse mortgage, borrowers must meet these requirements:

- **Age**: All borrowers must be at least 62 years old. If there are two borrowers (spouses), both must be 62 or older to be included on the loan.
- **Primary Residence**: The home must be your primary residence — you must live there as your main home.
- **Home Types**: Single-family homes, FHA-approved condominiums, manufactured homes meeting FHA requirements, and 1-4 unit properties where you occupy one unit.
- **Financial Assessment**: Lenders are required to assess your income, credit, and ability to pay property taxes, homeowners insurance, and HOA fees. Failure to meet these ongoing obligations can trigger loan default.
- **HUD Counseling**: Before applying, you must complete a counseling session with a HUD-approved reverse mortgage counselor. This independent counseling ensures you fully understand the program. Cost is typically $125-$200.
- **Home Equity**: While there is no minimum equity requirement, you must have enough equity to pay off any existing mortgage balance from the HECM proceeds. If not, you may need to bring funds to closing.

## How to use

1. Enter your age using the slider — the minimum age for HECM eligibility is 62.
2. Enter your home's estimated current market value.
3. Enter your existing mortgage balance (enter 0 if you own your home free and clear).
4. Choose between fixed or adjustable interest rate type based on your preference.
5. Click "Calculate Reverse Mortgage" and wait for the AI to retrieve current HECM rates and PLF tables.
6. Review your net proceeds, principal limit, and projected equity over time.
7. Study the loan-to-value table to see how your proceeds would differ if you waited to apply.

## FAQs

**Q:** What is the minimum age for a reverse mortgage?


**A:** The minimum age for a HECM reverse mortgage is 62. All borrowers on the title must be at least 62. Non-borrowing spouses who are younger may still have protections under current HUD rules that allow them to remain in the home if their spouse passes away.


**Q:** Do I have to make monthly payments on a reverse mortgage?


**A:** No. A reverse mortgage has no required monthly principal or interest payments. The loan is repaid when you sell the home, move out permanently, or pass away. You are still required to pay property taxes, homeowners insurance, and maintain the home.


**Q:** What happens to the loan when I die?


**A:** When the last borrower passes away, the loan becomes due. Your heirs have typically 6-12 months to either repay the loan and keep the home, or sell the home and use the proceeds to repay the loan. Any remaining equity after the loan is repaid goes to your heirs.


**Q:** Can I lose my home with a reverse mortgage?


**A:** Yes, but only under specific conditions. If you fail to pay property taxes, homeowners insurance, or HOA fees, or if you stop living in the home as your primary residence, the lender can call the loan due. This is why lenders conduct a financial assessment before approving the loan.


**Q:** How does a reverse mortgage affect Social Security and Medicare?


**A:** HECM proceeds generally do not affect Social Security or Medicare benefits because they are loan proceeds, not income. However, if you receive Medicaid or Supplemental Security Income (SSI), taking a lump sum could affect your eligibility. Consult with a benefits advisor to understand the impact on need-based programs.


**Q:** Is a reverse mortgage taxable?


**A:** Reverse mortgage proceeds are not taxable income because they are loan advances, not earnings. However, the interest that accrues on the loan is not deductible until it is actually paid (typically when the loan is repaid at the end). Consult a tax advisor for your specific situation.


**Q:** What is the difference between a HECM and a proprietary reverse mortgage?


**A:** HECM loans are federally insured by the FHA and have maximum loan limits set by HUD. Proprietary reverse mortgages are private products offered by individual lenders, often for higher-value homes that exceed the HECM limit. They are not FHA-insured and may have different terms and protections.

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