How this reverse mortgage calculator works
A Home Equity Conversion Mortgage (HECM) — the most common reverse mortgage, insured by the FHA — lets homeowners aged 62+ convert part of their home equity into cash without a monthly mortgage payment. The amount you can borrow is called the principal limit.
The principal limit is your home's value (capped at the 2025 HUD limit of $1,209,750) multiplied by a Principal Limit Factor (PLF). The PLF rises with the age of the youngest borrower and falls as the expected interest rate rises. From that we subtract the financed closing costs and any existing mortgage you must pay off — what's left is your estimated available cash.
What affects your payout
- Age: the older the youngest borrower, the higher the payout.
- Home value: more equity means more borrowing room, up to the HUD cap.
- Interest rate: lower expected rates increase the principal limit.
- Existing mortgage: must be paid off from the proceeds first.
The formula
Every HECM payout comes down to one equation:
Available cash = min(home value, $1,209,750) × PLF − financed closing costs − existing mortgage payoff
The Principal Limit Factor (PLF) is a figure HUD publishes for every combination of the youngest borrower's age and the "expected rate." It typically ranges from about 30% in the early 60s to over 55% in the late 70s and 80s. A lower expected rate lifts the PLF; a higher rate lowers it. This calculator estimates the PLF from your age and rate, then applies the formula above.
Worked example
Suppose the youngest borrower is 70, the home is worth $450,000, it's owned free and clear, and the expected rate gives a PLF of about 40%. The math: $450,000 × 0.40 = a $180,000 principal limit. Subtract roughly $11,000 in financed upfront costs (FHA insurance, origination, closing) and about $169,000 is available — as a lump sum, a line of credit, or monthly draws. Bump the borrower to age 75 or drop the rate, and the PLF — and the payout — climb.
Reverse mortgage vs. the alternatives
A reverse mortgage isn't the only way to tap equity. If you can comfortably make a monthly payment, a line of credit or a cash-out refinance is usually cheaper.
| Option | Monthly payment | Age | Best for |
|---|---|---|---|
| Reverse mortgage (HECM) | None required | 62+ | Staying long-term with no payment |
| HELOC | Interest-only, then rises | Any | Flexible, occasional borrowing |
| Cash-out refinance | One new fixed payment | Any | A single large need + rate reset |
Who qualifies for a reverse mortgage
- The youngest borrower on title is 62 or older.
- The home is your primary residence (you live there most of the year).
- You have substantial equity — generally owning the home outright or close to it.
- You complete independent HUD-approved counseling before applying.
- You can keep paying property taxes, homeowners insurance, and upkeep — these remain your responsibility.
What a reverse mortgage costs
- Upfront FHA mortgage insurance premium — about 2% of the home value.
- Origination fee — capped at $6,000.
- Closing costs — appraisal, title, recording, and third-party fees.
- Ongoing annual mortgage insurance — 0.5% of the loan balance per year.
Most of these are financed into the loan rather than paid in cash, which is why the cash you receive is less than the raw principal limit.
When a reverse mortgage makes sense — and when it doesn't
It can make sense if you're 62+, plan to stay in the home for years, want income without a monthly payment, and can keep up taxes and insurance. Think twice if you might move within a few years (the upfront costs won't pay off), you want heirs to inherit the home with maximum equity, or your budget is so tight that property taxes and insurance are already a stretch — falling behind on those is the most common trigger for foreclosure. For a deeper breakdown, read reverse mortgage pros and cons.
Frequently asked questions
How much can I get from a reverse mortgage?
What age do you have to be?
Do I still own my home?
What does it cost?
Sources: CFPB — Reverse Mortgages · CFPB — What is a reverse mortgage? · our methodology.