Reverse Mortgage Calculator

How Reverse Mortgages Work

A reverse mortgage (HECM - Home Equity Conversion Mortgage) allows homeowners aged 62+ to convert home equity into cash without monthly mortgage payments. Instead of paying the lender monthly, the lender pays you via lump sum, monthly payments, line of credit, or a combination. The loan balance grows over time as interest accrues on the amount borrowed, and is repaid when the borrower sells the home, moves permanently, or passes away.

The amount you can access depends on three factors: age (older = more available), home value (capped at $1,149,825 for 2026), and interest rates (lower rates = more available). A 70-year-old with a $450,000 home might access $180,000-$225,000. A key protection: reverse mortgages are non-recourse, meaning you (or your heirs) will never owe more than the home is worth, even if the loan balance exceeds the home value.

Reverse Mortgage Costs and Considerations

Reverse mortgages carry significant upfront costs: origination fee (up to $6,000), upfront mortgage insurance premium (2% of home value), and standard closing costs ($3,000-5,000). These costs are typically financed into the loan. Ongoing costs include 0.5% annual MIP and interest on the loan balance. The biggest consideration: the loan balance grows over time, reducing the equity available to your heirs. However, FHA insurance guarantees that heirs will never owe more than 95% of the appraised value.

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