Reverse Mortgage Calculator
Calculate your reverse mortgage options and available funds
Last updated: January 2025
Important Information
Reverse mortgages (HECM) are available to homeowners 62+. You remain responsible for property taxes, insurance, and maintenance. The loan becomes due when you sell, move, or pass away. This calculator provides estimates only.
Reverse Mortgage Details
Home Equity Over Time
Financial Breakdown
How Reverse Mortgages Work
A reverse mortgage (HECM) allows homeowners 62+ to convert home equity into cash without selling. You retain ownership and there are no monthly payments. The loan balance grows over time and is repaid when you sell, move, or pass away. Your heirs can pay off the loan and keep the home, or sell it to settle the debt.
Understanding Reverse Mortgages
The HECM Program
The Home Equity Conversion Mortgage (HECM) is the most common type of reverse mortgage in the United States and is insured by the Federal Housing Administration (FHA). Created by Congress in 1988, the HECM program allows homeowners aged 62 and older to access their home equity without making monthly mortgage payments. The FHA insurance guarantees that borrowers will receive their loan proceeds even if the lender goes out of business, and it ensures that borrowers or their heirs will never owe more than the home is worth.
Eligibility Requirements
To qualify for a HECM reverse mortgage, you must be at least 62 years old, own the property outright or have a low remaining mortgage balance that can be paid off with the reverse mortgage proceeds, and occupy the home as your primary residence. Borrowers must also complete a HUD-approved counseling session to ensure they understand the terms and obligations. The property must meet FHA standards and can be a single-family home, a 2-4 unit property (with one unit occupied by the borrower), an FHA-approved condominium, or a manufactured home meeting FHA requirements.
How Payments Work
HECM borrowers can receive funds in several ways: a lump sum (available only with a fixed-rate HECM), equal monthly payments for as long as they live in the home (tenure plan), equal monthly payments for a set period (term plan), or a line of credit that grows over time. Borrowers can also combine monthly payments with a line of credit. The line of credit option is particularly popular because the unused portion grows at the same rate as the loan balance, effectively increasing your available funds over time.
Costs and Fees
Reverse mortgage costs include an origination fee (up to $6,000, based on home value), an initial mortgage insurance premium (MIP) of 2% of the home value, and ongoing annual MIP of 0.5% of the outstanding loan balance. Standard closing costs such as appraisal, title search, and recording fees also apply, typically ranging from $2,000 to $5,000. Most of these costs can be financed into the loan rather than paid out of pocket, though this reduces the net proceeds available to the borrower.
Pros and Cons
The primary advantages of a reverse mortgage include eliminating monthly mortgage payments, providing a flexible source of retirement income, and allowing you to remain in your home. The non-recourse feature means you or your heirs will never owe more than the home is worth. However, the loan balance grows over time as interest accrues, reducing the equity available to your heirs. Borrowers must continue paying property taxes, homeowners insurance, and maintenance costs or risk foreclosure. Reverse mortgages also carry higher fees than traditional mortgages and reduce the assets available for estate planning.
Frequently Asked Questions
What is a reverse mortgage (HECM)?
A Home Equity Conversion Mortgage (HECM) is an FHA-insured loan that allows homeowners aged 62 or older to convert home equity into cash without selling their home. The loan is repaid when the borrower moves, sells, or passes away.
Who qualifies for a reverse mortgage?
You must be at least 62 years old, own your home outright or have substantial equity, live in the home as your primary residence, and complete HUD-approved counseling. The home must meet FHA property standards.
Do I still own my home with a reverse mortgage?
Yes, you retain full ownership and title to your home. You are still responsible for property taxes, homeowner's insurance, and maintenance. The loan becomes due when you no longer live in the home as your primary residence.
What happens when I move out or pass away?
When you permanently leave the home, the loan becomes due. Your heirs can repay the loan and keep the home, sell the home to repay the loan (keeping any remaining equity), or let the lender sell it. HECM loans are non-recourse — if the home sells for less than the loan balance, FHA insurance covers the difference and heirs owe nothing.
Are reverse mortgage proceeds taxable?
No. Reverse mortgage proceeds are considered loan advances, not income, so they are not taxable. They also do not affect your Social Security or Medicare benefits. However, the interest on a reverse mortgage is not deductible until it is actually paid, which typically occurs when the loan is repaid.