Estimate HECM reverse mortgage proceeds against home equity for a homeowner 62+.
Available proceeds (after paying off existing mortgage)
—
Principal Limit Factor (PLF)
—
Monthly tenure (lifetime)
—
Your breakdown
Updates live as you type| Step | Amount |
|---|
How much equity a HECM unlocks
A Home Equity Conversion Mortgage, the FHA-insured reverse mortgage most borrowers use, never lets you tap your full home value. The lender applies a Principal Limit Factor, or PLF, to the home's appraised value (capped at the FHA lending limit), and the result is the most the loan can ever advance. Two things drive the PLF: the age of the youngest borrower and the expected interest rate. Older borrowers get a higher factor because the loan has fewer years to compound before repayment. Lower rates also lift the factor, since the balance grows more slowly. This calculator approximates that relationship with a simple linear model, so treat its PLF as an estimate. The official figures come from HUD's published PLF tables, and your loan officer will pull the exact factor for your age and rate.
A 75-year-old with a $600,000 home
Run the defaults: a youngest borrower aged 75, a $600,000 home, a 7 percent expected rate, and an existing $100,000 mortgage that must be cleared first. Here is the estimate the tool builds.
So a homeowner sitting on $600,000 of value, but carrying a $100,000 mortgage, frees up about $143,000 once the old loan and costs are paid. Note how much of the equity stays locked: the PLF caps borrowing at $255,000, less than half the home's worth, and the existing mortgage eats a big chunk of that. The chart below shows the slices.
Three ways to take the money
Those proceeds can come out as a lump sum, a growing line of credit, or a monthly tenure payment for as long as you live in the home. The tool estimates the tenure option at roughly $1,011 a month for this borrower, spread actuarially to age 100. The line of credit is the option most financial planners favor, because the unused portion grows over time, effectively giving you a larger borrowing capacity later. The lump sum carries the most risk of being spent too fast and letting the balance compound against you. There are no monthly payments on any option; the loan and its accrued interest come due when the last borrower sells, moves out for more than a year, or passes away.
What the loan costs your heirs
A reverse mortgage runs the amortization in reverse. Interest and mortgage insurance premiums are added to the balance every month, so the debt climbs while your remaining equity shrinks. At 7 percent, a balance roughly doubles in about a decade. Because HECMs are non-recourse, your heirs never owe more than the home is worth, and FHA insurance covers any shortfall, but the flip side is that a long-held reverse mortgage can consume most of the equity you hoped to leave behind. Where this product fits is a homeowner who plans to stay put and needs cash flow. It is a poor fit if leaving the house to family is a priority, or if you might move within a few years and waste the high upfront costs.
Do I still pay property taxes and insurance?
Yes, and this is where reverse mortgages most often go wrong. You remain responsible for property taxes, homeowners insurance, and upkeep. Falling behind on any of them can trigger a default and force repayment, even though you have no mortgage payment. HUD requires a financial assessment up front, and some borrowers must fund a set-aside from the proceeds to cover these charges.
Is the money I receive taxable income?
No. Loan proceeds are not income, so they are not taxed and do not directly affect Social Security or Medicare eligibility. They can, however, affect need-based benefits like Medicaid or Supplemental Security Income if the cash sits in your accounts past month-end, so coordinate timing carefully if you rely on those programs.