Loan balance vs. home value
| Home value counted toward the loan | $400,000 |
| Principal limit at 6.50%, age 70 | $161,000 |
| − Current mortgage paid off at closing | $50,000 |
| − Upfront FHA mortgage insurance (2%) | $8,000 |
| − Lender origination fee | $6,000 |
| − Other closing costs | $2,500 |
| = Estimated available proceeds | $94,500 |
These figures are estimates built on representative HUD principal limit factors and typical fees — not a loan offer. Actual amounts are set by the lender from the HUD tables in effect at application. HUD requires a session with an approved counselor before any HECM application, and the borrower must live in the home and keep taxes, insurance and upkeep current.
Reading your results
Principal limit is the gross borrowing ceiling — the counted home value times the HUD factor for your age and rate. Nobody receives this number in cash; it is where the arithmetic starts.
Cash at closing respects the HECM first-year rule: no more than 60% of the principal limit (or mandatory obligations plus 10%) may be disbursed in the first twelve months. The rest becomes available a year later.
Line of credit shows the full remainder after costs. Its unused balance grows at the loan’s own rate — a feature unique to HECMs, and the reason many financial planners suggest opening the line early and letting it sit.
Monthly tenure payment spreads the same remainder into equal checks that keep arriving for as long as you occupy the home — even past age 100, and even after the payments have exceeded the original limit.
Reverse mortgage FAQ
- How much can I borrow with a reverse mortgage?
- The starting point is the principal limit — your counted home value multiplied by a HUD factor that rises with age and falls as rates climb. For a 70-year-old at a 6.5% rate the factor is roughly 40%. Upfront FHA insurance, lender fees and the payoff of any existing mortgage all come out of that limit; what remains is the money you can actually use.
- Who qualifies for a HECM?
- The youngest borrower on title must be at least 62, the home must be your primary residence, and you need meaningful equity — usually half the home value or more. HUD also requires every applicant to complete a session with an independent, HUD-approved counselor before the lender can process the application.
- Do I make monthly payments on a reverse mortgage?
- No. Interest and the annual insurance premium are simply added to the loan balance each month, which is why the balance grows over time. You remain responsible for property taxes, homeowner insurance and the upkeep of the home — falling behind on those can make the loan due early.
- Should I take a lump sum, a credit line or monthly payments?
- A lump sum suits a single large expense such as paying off the old mortgage or a renovation. The credit line is the most flexible — its unused portion keeps growing, so many borrowers treat it as a reserve. Tenure payments turn equity into a predictable monthly income for as long as you live in the home. The three can also be combined.
- Can I end up owing more than the house is worth?
- No. A HECM is non-recourse by law — the FHA insurance you pay for guarantees that neither you nor your heirs ever repay more than the home brings at sale, even if the balance has outgrown the property value.
- What happens to the home when I move out or pass away?
- The loan becomes due once the last borrower permanently leaves the home. Your heirs choose what happens next — they can sell the house and keep every dollar above the loan balance, or keep the home by repaying the balance (or 95% of the appraised value, whichever is less).
What this calculator estimates
A reverse mortgage lets homeowners aged 62 and over convert part of their equity into money they can spend, without selling the house and without taking on a monthly payment. This calculator models a HECM — the Home Equity Conversion Mortgage, the FHA-insured program behind nearly all reverse mortgages in the United States — and shows the figure that matters most: how much would actually reach you after every mandatory cost is settled.
Enter your home value, the age of the youngest borrower, whatever is still owed on the current mortgage, and an expected interest rate. The calculator looks up the corresponding principal limit factor, applies the FHA lending limit, subtracts the upfront insurance premium, the origination fee, other closing costs and the mortgage payoff — and presents the remainder three ways: cash available in the first year, a line of credit, and a lifetime monthly payment.
Why age and rate move the numbers so much
The principal limit factor is HUD’s answer to a simple question: how much can be lent today so that the balance, growing silently at the note rate plus 0.5% annual insurance, is still covered by the house decades from now? Two inputs dominate that answer:
- Age. An 82-year-old borrower has a shorter expected loan life than a 62-year-old, so HUD lets them access a noticeably larger share of the home — often 15–20 percentage points more.
- The expected rate. Every extra point of interest makes the future balance grow faster, so the factor drops. A rate move from 6% to 8% can shrink the accessible share of a home by a quarter.
The home value itself is counted only up to the FHA lending limit ($1,249,125 in 2026). Equity above that line stays yours — it simply doesn’t enlarge the loan.
The costs a HECM builds in
Reverse mortgages are more expensive to open than regular ones, and this calculator makes those costs visible instead of burying them. The upfront FHA premium is 2% of the counted home value. The origination fee follows the federal formula — 2% of the first $200,000 plus 1% above it, never less than $2,500 and never more than $6,000. Appraisal, title and recording costs vary by state; the advanced options let you adjust that estimate. All of these, plus the old mortgage payoff, are deducted before a dollar reaches you — if the deductions eat the entire principal limit, the calculator will tell you the loan frees up nothing.
Watching the balance and the equity
The chart projects two curving lines: the loan balance compounding upward, and the home value drifting with whatever appreciation you assume. The vertical gap between them is the equity that would remain for you or your heirs at any age. Because a HECM is non-recourse, the story has a floor — the debt can never exceed what the home sells for. Planning a regular purchase instead? Our mortgage calculator handles the classic direction, and the current rates by state show what lenders are quoting this week.