Reverse Mortgage Calculator (HECM)
Estimate the amount of equity you can access based on your age and home value.
Understanding the Reverse Mortgage Calculator
A reverse mortgage, specifically the Home Equity Conversion Mortgage (HECM), allows homeowners aged 62 and older to convert a portion of their home equity into cash. Unlike a traditional mortgage, you don't make monthly payments; instead, the loan is repaid when you sell the home, move out permanently, or pass away.
How Much Can I Get from a Reverse Mortgage?
The amount of money you can receive depends on several critical factors that our calculator uses to generate your estimate:
- Borrower Age: Older borrowers generally qualify for a higher percentage of their home's value.
- Home Value: The current market appraisal. For 2024, the FHA maximum claim amount is capped at $1,149,825.
- Interest Rates: Lower interest rates typically result in higher borrowing limits.
- Existing Liens: Any current mortgage balance must be paid off first using the reverse mortgage proceeds.
Reverse Mortgage Example Scenario
Consider a 72-year-old homeowner with a home valued at $600,000 and an existing mortgage of $100,000. Based on current Principal Limit Factors (PLF):
- Gross Principal Limit: Roughly $260,000 (depending on current rates).
- Mortgage Payoff: -$100,000.
- Net Cash Available: Approximately $160,000 (minus closing costs).
Eligibility Requirements
To qualify for a HECM loan, you must meet the following criteria:
First, you must be at least 62 years of age. The home must be your primary residence and meet FHA property standards. You must also complete a counseling session with a HUD-approved professional to ensure you understand the loan's implications. Finally, you must demonstrate the financial ability to continue paying property taxes, homeowners insurance, and maintenance costs.
Important Considerations
While a reverse mortgage can provide financial freedom during retirement, it is important to remember that the loan balance grows over time as interest and mortgage insurance premiums are added. This reduces the remaining equity in the home. Always consult with a financial advisor to determine if this is the right strategy for your specific retirement goals.