Reverse Mortgage Calculator

How Much You Can Borrow: Principal Limit Factors

A HECM does not lend against your home's full value. It lends a principal limit factor (PLF) of the lesser of the appraised value and the FHA maximum claim amount, which for 2026 is $1,249,125 (HUD Mortgagee Letter 2025-22, up from $1,209,750 in 2025). Equity above that figure is simply outside the programme.

The PLF itself is set by a HUD table indexed on two things: the age of the youngest borrower or eligible non-borrowing spouse, and the expected interest rate. Age matters because the loan is repaid when the last borrower leaves the home, so a younger borrower means a longer expected term and a smaller advance. The rate matters just as much, and in the opposite direction from most lending: a higher expected rate means the balance compounds faster, so HUD lends less up front. At 65 the factor runs from roughly 0.60 when expected rates are near 3% down to roughly 0.35 near 7%.

The figures on this page assume an expected rate in the region of 5%, which puts a 65-year-old at about 56%. Treat that as an illustration, not a quote: at today's rates your real factor could be ten points either side of it. Only a lender running the current HUD table against your actual age and expected rate can tell you the real number, and HUD requires you to complete counselling with a HUD-approved housing counsellor before you can apply. That session is free or low-cost and is worth having before you speak to any lender.

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 session with a HUD-approved housing counsellor 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.