Use the reverse mortgage to pay off mortgage calculator to estimate the net cash proceeds available to you after settling your existing home loan and covering all associated closing costs.
Reverse Mortgage Net Payout Calculator
Estimated Net Proceeds Available:
reverse mortgage to pay off mortgage calculator Formula
The core calculation determines the Principal Limit (PL), subtracts the existing mortgage and closing costs to find the net available funds.
1. Principal Limit (PL) = Home Value × PL Factor
2. Total Closing Costs (TCC) = Origination Fee + MIP + Other Fees
3. Net Payout = PL - Existing Mortgage Balance - TCC
Formula Source: CFPB Reverse Mortgage Guide, HUD HECM Guidelines
Variables Explained
Understanding the inputs is crucial for accurate results:
- Current Home Value: The appraised value of your property, which acts as the maximum collateral base for the loan.
- Existing Mortgage Balance: The total amount you currently owe on your primary mortgage. This must be paid off first.
- Age of Youngest Borrower: The age of the youngest borrower (must be 62 or older) determines the Principal Limit Factor.
- Expected Interest Rate (EIR): This rate, determined by the lender, impacts the Principal Limit Factor—a lower rate generally results in a higher PL.
Related Financial Calculators
- HECM Monthly Payout Estimator
- Reverse Mortgage Costs Comparison Tool
- HELOC vs. Reverse Mortgage Calculator
- Net Worth & Equity Calculator
What is a reverse mortgage to pay off mortgage calculator?
This calculator is a specialized tool designed for homeowners aged 62 and older who are considering using a Home Equity Conversion Mortgage (HECM), the most common type of reverse mortgage, to eliminate their existing forward mortgage debt. The primary function is to calculate the remaining funds (the net payout) that the borrower receives after all mandatory obligations are satisfied.
The reverse mortgage lender’s first requirement is always to pay off any existing debt secured by the home, including the current mortgage. The calculator first estimates the maximum amount you can borrow (the Principal Limit), then deducts your existing mortgage balance, the required FHA Mortgage Insurance Premium (MIP), origination fees, and other closing costs. The result is the net cash available for your use.
How to Calculate Reverse Mortgage Proceeds (Example)
- Determine Principal Limit Factor: Based on the Youngest Borrower’s Age and the Expected Interest Rate, find the corresponding PL factor (e.g., Age 75, EIR 5.0% might yield a factor of 0.52).
- Calculate Principal Limit (PL): Multiply the Home Value ($500,000) by the PL Factor (0.52). PL = $500,000 * 0.52 = $260,000.
- Estimate Closing Costs: Calculate the total mandatory costs (e.g., $10,000 in fees and MIP).
- Subtract Debts and Costs: Take the PL ($260,000) and subtract the Existing Mortgage Balance ($100,000) and Total Closing Costs ($10,000).
- Final Net Payout: $260,000 – $100,000 – $10,000 = $150,000. This is the net cash available.
Frequently Asked Questions (FAQ)
Can I use a reverse mortgage if I have an existing HELOC?
Yes. Any existing mortgage, Home Equity Line of Credit (HELOC), or lien must be paid off in full as part of the reverse mortgage closing process. The amounts are factored into the initial draw from the Principal Limit.
What is the minimum age to qualify for this type of loan?
For a federally insured HECM reverse mortgage, the youngest borrower or non-borrowing spouse must be at least 62 years old to qualify.
Does the Expected Interest Rate (EIR) change over the life of the loan?
The EIR is only used at the time of origination to determine the initial Principal Limit. The actual interest rate (and resulting loan balance growth) will vary over time based on the selected loan option (fixed vs. adjustable).
What happens if the Principal Limit is less than my current mortgage balance?
In this scenario, a reverse mortgage is usually not possible unless you have enough cash from other sources to pay the difference between your current mortgage balance and the Principal Limit. The current mortgage *must* be paid off.