Reverse Mortgage Calculator (HECM)

Understanding the HECM Reverse Mortgage

A Home Equity Conversion Mortgage (HECM) is the FHA-insured reverse mortgage program that lets homeowners aged 62 and older convert part of their home equity into cash without taking on a monthly mortgage payment. The loan is repaid when the last borrower dies, sells the home, or permanently moves out. Because no monthly payment is required, the loan balance grows over time as interest and mortgage insurance premiums accrue. The borrower (or heirs) never owe more than the home is worth at repayment, thanks to the FHA insurance.

How the Principal Limit Is Calculated

The single most important number in a HECM is the Principal Limit — the maximum gross proceeds available. It is computed from two inputs:

Principal Limit = min(Home Value, HECM Limit) × Principal Limit Factor (PLF)

where the 2026 HECM lending limit is $1,249,125 (updated annually by HUD), and the PLF is read from a HUD-published table indexed by the youngest borrower's age and the expected interest rate. Older borrowers and lower rates produce higher PLFs because the loan is statistically likely to be outstanding for a shorter period and accrue less interest.

The Principal Limit Factor Table

The PLF table is published by HUD in Mortgagee Letter updates and codified in the HECM regulations. At an expected rate of 5%, the factors rise roughly from 0.40 at age 62 to 0.77 at age 95. At 7%, the same ages span roughly 0.30 to 0.66. the reverse mortgage calculator uses the official 2026 table and performs bilinear interpolation between age and rate rows, then applies the formula above. The actual PLF you receive will come from the lender's HECM origination software and may differ slightly based on the lender's specific rate assumptions.

Closing Costs and Ongoing Costs

HECM closing costs are deducted from the principal limit before any cash is paid to the borrower. The major components:

• Upfront Mortgage Insurance Premium (MIP): 2.00% of the lesser of home value or the HECM limit. This funds the FHA insurance pool that guarantees you will never owe more than the home is worth.
• Origination Fee: Capped by HUD at $6,000. The formula is the greater of $2,500 or 2% of the home value up to $200,000, plus 1% of value above $200,000 — but never more than $6,000.
• Third-Party Costs: Appraisal, title insurance, escrow, recording, credit check, and survey. Typically $2,500–$4,000; we use a midpoint of $3,000.
• Ongoing MIP: 0.50% per year on the outstanding balance, accruing monthly. Plus accrued interest at the note rate.

The Net Principal Limit is what remains after subtracting closing costs and any existing lien that must be paid off. That net amount can be taken as a lump sum, monthly tenure payments, a line of credit, or a combination.

Worked Example: 70-Year-Old, $500,000 Home, 7% Rate

1. Capped value. Home value $500,000 is below the HECM limit of $1,249,125, so the full $500,000 is used.
2. PLF lookup. Age 70 at an expected rate of 7.000% gives a PLF of approximately 0.396 (from the 2026 HUD table).
3. Principal limit. $500,000 × 0.396 = $198,000 gross proceeds.
4. Closing costs. Upfront MIP (2% × $500,000) = $10,000. Origination fee (capped) = $6,000. Third-party costs ≈ $3,000. Total = $19,000.
5. Existing lien. Assuming no existing mortgage, $0.
6. Net cash available. $198,000 − $19,000 − $0 = $179,000 as a lump sum, line of credit, or monthly tenure payments.

If the borrower had a $100,000 existing mortgage, it would have to be paid off first from the $198,000 principal limit, leaving $198,000 − $19,000 − $100,000 = $79,000 in net cash to the borrower.

HECM vs HELOC vs Home Equity Loan

Reverse mortgage proceeds are generally loan advances, not income, so they are tax-free. Consult a tax advisor for your situation.

Payout Options

Once the net principal limit is computed, you can receive proceeds five ways:

• Lump sum. A single draw at closing, subject to the principal limit. Highest upfront cash, no future draws available on most HECM fixed-rate loans.
• Tenure payments. Equal monthly payments for as long as you live in the home. Payments stop only when the last borrower dies, sells, or moves out.
• Term payments. Equal monthly payments for a fixed number of years you choose.
• Line of credit. Unscheduled draws up to the principal limit. The unused line grows over time at the note rate plus MIP, preserving more borrowing capacity for the future.
• Modified tenure or term. A line of credit combined with monthly payments.

Eligibility and Obligations

• Age. The youngest borrower (and any non-borrowing spouse) must be at least 62, though non-borrowing spouses may be eligible for limited protections under HUD rules.
• Primary residence. The home must be the borrower's primary residence. Second homes and investment properties do not qualify.
• Counseling. Borrowers must complete a session with a HUD-approved HECM counselor before applying. The counselor explains alternatives, costs, and obligations.
• Property charges. Borrowers must continue paying property taxes, homeowners insurance, and maintain the home. Failure to do so can trigger default and foreclosure.
• Financial assessment. Lenders review income, credit, and reserves to confirm the borrower can meet the ongoing property-charge obligations.

Risks and Considerations

The HECM is non-recourse — the borrower (or estate) will never owe more than the home is worth at repayment, even if the loan balance exceeds the home value. However, the rising loan balance erodes remaining equity and reduces what heirs receive. Because no monthly payment is required, the loan compounds: interest and ongoing MIP accrue on a growing balance. Heirs typically repay the loan by selling the home, refinancing into a traditional mortgage, or deeds in lieu of foreclosure. The upfront costs (2% MIP plus origination plus third-party) are substantial, so HECMs are usually a poor choice if you plan to move within a few years. Compare against a HELOC, home equity loan, or cash-out refinance before deciding. Sources: HUD HECM Program, CFPB Loan Options.

2026 HECM Limits and Rate Context

The 2026 FHA HECM lending limit is $1,249,125, matching the conforming loan limit set by the Federal Housing Finance Agency for high-cost areas. With long-term mortgage rates in the high-6% to low-7% range, expected rates used for PLF computation typically run around 6.5–7.5% in 2026, producing PLFs of roughly 0.30–0.55 for borrowers in their late 60s to mid 70s. Borrowers in their 80s see PLFs of 0.55–0.75. The 2% upfront MIP has been a fixture of the HECM program since the 2017 reforms; prior to that it was 0.50% with a higher ongoing MIP. Source: HUD HECM Program.

How this reverse mortgage calculator Works

Last updated: June 30, 2026

the reverse mortgage calculator performs the official HECM principal limit computation in three steps: (1) cap the home value at the HECM limit, (2) look up the PLF by age and rate using bilinear interpolation on HUD's 2026 table, (3) subtract closing costs and the existing lien to derive net cash.

The three-step calculation

1. Cap home value. cappedValue = min(Home Value, $1,249,125).
2. Look up PLF. bilinear interpolation over the HUD 2026 PLF grid by age (62–95) and expected rate (3.0–10.0%).
3. Compute net. Principal Limit = cappedValue × PLF. Upfront MIP = 2% × cappedValue. Origination fee = min($6,000, max($2,500, 2% × home value up to $200k + 1% above)). Third-party = $3,000. Net Cash = Principal Limit − Closing Costs − Existing Lien.

Verify it in any spreadsheet

=MIN(500000, 1249125)              // capped value = $500,000
=500000 * 0.396                    // principal limit = $198,000  (PLF for age 70 @ 7%)
=500000 * 0.02                     // upfront MIP = $10,000
=MIN(6000, MAX(2500, 500000*0.02)) // origination = $6,000 (capped)
=198000 - 10000 - 6000 - 3000 - 0  // net cash = $179,000

Assumptions & limitations

• Expected rate, not the note rate. The PLF is computed from the lender's expected rate, which includes a margin above the index. The actual note rate will differ.
• Lump-sum draw at closing. Many HECMs restrict the lump-sum draw at closing to 60% of the principal limit in the first 12 months under the "initial disbursement limit" rule.
• Closing costs vary. Third-party costs differ by location and lender; $3,000 is a midpoint estimate.
• Counseling fee. A separate $125–$200 counseling fee is paid directly to the HUD-approved counselor.
• For educational purposes only. this reverse mortgage calculator produces estimates for planning; the actual PLF and net proceeds come from the lender's origination software and HUD-approved disclosures.

Data sources

• HUD HECM Program — Principal Limit Factor table, lending limit, MIP rules.
• 24 CFR Part 206 — HECM regulations.
• CFPB Loan Options — borrower-facing reverse mortgage guidance.