Use this Reverse Mortgage Calculator to estimate the maximum loan proceeds you may be eligible to receive based on your home value, age, and current expected interest rates.
Reverse Mortgage Loan Proceeds Calculator
Estimated Maximum Loan Proceeds
$0.00Reverse Mortgage Formula: Principal Limit Factor (PLF)
Maximum Principal Limit (PL) = Max Claim Amount x Principal Limit Factor (PLF)
The Max Claim Amount is the lesser of the Home Value or the FHA Maximum Claim Limit ($1,149,825 for 2024).
The PLF is the core factor, mathematically complex and derived actuarially based on age and interest rate.
Formula Source: HUD HECM GuidelinesVariables Explained
- Home Value ($): The current appraised market value of the property. This is used to determine the maximum claim amount.
- Youngest Borrower’s Age: The age of the youngest individual on the loan. The older the borrower, the higher the Principal Limit Factor (PLF). Must be 62 or older.
- Expected Interest Rate (%): An assumed long-term interest rate used in the actuarial tables to determine the PLF. Higher rates generally result in a lower PLF.
What is a Reverse Mortgage?
A reverse mortgage, most commonly a Home Equity Conversion Mortgage (HECM) insured by the FHA, allows homeowners aged 62 and older to convert a portion of their home equity into cash. Unlike a traditional mortgage, the borrower does not make monthly payments. Instead, the loan balance grows over time as interest and mortgage insurance are added.
The loan becomes due when the last surviving borrower moves out, sells the home, or passes away. HECMs are non-recourse loans, meaning the borrower (or their estate) can never owe more than the home’s value, protecting other assets.
How to Calculate Reverse Mortgage Proceeds (Example)
- Determine the Home Value: Start with the current appraised value of the property (e.g., $400,000).
- Identify Borrower Age and Interest Rate: Use the youngest borrower’s age (e.g., 65) and the Expected Interest Rate (e.g., 5.5%).
- Find the Principal Limit Factor (PLF): Look up the corresponding PLF using the official FHA/HUD tables. (For our illustrative example, let’s use a hypothetical PLF of 0.45).
- Calculate the Principal Limit: Multiply the lesser of the Home Value or the FHA limit by the PLF: $400,000 \times 0.45 = \$180,000$.
- Subtract Mandatory Obligations: Deduct closing costs and initial mortgage insurance premiums (MIP) from the Principal Limit to determine the net loan proceeds available to the borrower.
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Frequently Asked Questions (FAQ)
What is the minimum age requirement for a reverse mortgage? The borrower and all title holders must be at least 62 years old to qualify for a Home Equity Conversion Mortgage (HECM).
Do I still own my home with a reverse mortgage? Yes, the borrower retains the title to the home. The loan is a lien against the property, similar to a traditional mortgage.
Can the lender take my house if I run out of money? No. The lender cannot take the house if the loan balance exceeds the home value. However, you must continue to pay property taxes, homeowners insurance, and maintain the property.
Are the loan proceeds taxable? No, generally the funds received from a reverse mortgage are considered loan proceeds, not income, and are therefore not taxable.