Reverse Mortgage Calculator

Step 1: Maximum Claim Amount

Max Claim Amount = min(Appraised Home Value, $1,149,825)

All upfront costs and the PLF are applied to the Max Claim Amount, not the raw home value — so homes worth more than the lending limit are capped.

Step 2: Principal Limit Factor (PLF)

HUD publishes a table of PLF values for every age (62–95) and expected interest rate combination. This calculator uses bilinear interpolation between the key reference points in the table. A 70-year-old borrower at 7% has a PLF of roughly 31%; a 85-year-old at 5% has a PLF of roughly 55%.

Principal Limit = Max Claim Amount × PLF

Step 3: Upfront Costs

Upfront MIP    = Max Claim Amount × 2.0%
Origination    = min($6,000, max($2,500, first $200k × 2% + remainder × 1%))
Closing Costs  = ~$3,000 (estimated)
Total Upfront  = Upfront MIP + Origination + Closing Costs

Step 4: Net Proceeds

Net Proceeds = Principal Limit − Total Upfront Costs − Existing Mortgage Payoff

If Net Proceeds is negative, the existing mortgage exceeds borrowing capacity.

Step 5: Monthly Tenure Payment

Tenure Payment = (Available Credit × r) ÷ (1 − (1 + r)^−N)

Where r is the monthly interest rate and N is the expected term in months assuming the loan runs to age 100 (HUD actuarial assumption).

Step 6: Balance Growth Projection

Starting from the full Principal Limit (lump-sum scenario), the balance grows each month by:

balance = balance × (1 + monthly_rate + 0.5%/12) + $35 servicing fee

The chart compares this growing balance against the home's projected value at your assumed annual appreciation rate.

1. Determining Whether You Qualify

Before committing to a mandatory HECM counseling session (which costs $125–$200), run this calculator to see whether your home's equity and your existing mortgage balance produce meaningful net proceeds. If the existing mortgage payoff consumes nearly all of the Principal Limit, a reverse mortgage may not be financially worthwhile at this time — waiting and paying down the mortgage first could improve the outcome.

2. Evaluating Lump Sum vs. Tenure vs. Line of Credit

The net proceeds shown here represent the lump-sum scenario. Compare that number against the monthly tenure payment to decide which disbursement option better fits your income needs. If you don't need cash immediately, the line-of-credit option (adjustable-rate only) grows at the loan rate and can exceed the lump-sum amount significantly over 10–15 years.

3. Understanding the Non-Recourse Protection

The 30-year balance growth chart shows when (if ever) the loan balance is projected to exceed the home's value at your assumed appreciation rate. This is not a financial crisis — the non-recourse guarantee means heirs simply hand the keys to the lender and owe nothing beyond the home's sale price. Use the chart to set expectations with family members about the home's likely equity position at the end of the loan.

4. Modeling the Impact of Rate and Age on Borrowing Capacity

Change the expected interest rate and age inputs to see how much your PLF and net proceeds change. A borrower who waits 5 years to take out a HECM will have a higher PLF (more to borrow) but will also have 5 fewer years of growth on a line of credit. This trade-off analysis helps determine whether timing the HECM is advantageous.