Reverse Mortgage Proceeds Calculator

What Is a Reverse Mortgage?

A reverse mortgage is a loan available to homeowners age 62 or older. The most common type is the Home Equity Conversion Mortgage (HECM), which is insured by the Federal Housing Administration (FHA).

Instead of making monthly payments to a lender, the lender pays you.

You can receive the money as:

• A line of credit
• Monthly payments
• A lump sum
• Or a combination

The loan is typically repaid when:

• You move out permanently
• You sell the home
• Or you pass away

The home is usually sold to repay the balance. Any remaining equity belongs to you or your heirs.

What Is a Reverse Mortgage Proceeds Calculator?

A Reverse Mortgage Proceeds Calculator estimates:

• Your maximum principal limit
• The upfront mortgage insurance premium (MIP)
• Your net proceeds available
• Monthly payments (if applicable)
• Line of credit growth
• Lump sum limits

It uses simplified formulas based on HUD guidelines for HECM loans.

This tool does not guarantee loan approval. It provides estimates only.

Key Inputs in the Calculator

The calculator you shared collects the following details:

1. Age of the Youngest Borrower

Minimum age is 62.

Why it matters:
The older you are, the more you can usually borrow. Lenders use actuarial tables. Older borrowers have shorter life expectancy, so the loan is expected to be outstanding for fewer years.

Higher age = higher principal limit.

2. Age of Non-Borrowing Spouse (Optional)

If your spouse is under 62 and not listed as a borrower, this can create risk.

If the borrowing spouse passes away, the loan may become due. That could affect the younger spouse’s ability to stay in the home.

The calculator displays a warning if:

• A spouse is listed
• And that spouse is under 62

This is an important planning issue.

3. Estimated Home Value

Enter your current estimated home value.

The loan is based on the lesser of:

• Your home value
• The HECM Maximum Claim Amount (MCA)

For 2024, the calculator uses an MCA of $1,149,825.

If your home is worth more than that, calculations are capped at the limit.

4. Expected Interest Rate

Interest rate affects how much you can borrow.

Higher rates reduce your principal limit because interest compounds over time.

The calculator adds 0.5% to estimate the “expected rate” used in principal limit calculations.

Higher rate = lower proceeds.

5. Existing Mortgage Balance

If you still owe money on your home, that balance must be paid off with reverse mortgage proceeds.

Example:

• Principal limit: $250,000
• Existing mortgage: $100,000
• That $100,000 comes out first

Only the remaining funds are available to you.

6. Estimated Closing Costs

These include:

• Origination fees
• Appraisal
• Title insurance
• Recording fees
• Mortgage insurance premium

The calculator subtracts closing costs from your available proceeds.

7. Disbursement Plan Options

You can choose how to receive funds:

Line of Credit

Flexible. You withdraw money as needed.

Unused funds grow over time. The calculator shows:

• Initial credit line
• Estimated credit line growth in year one

Monthly Tenure Payment

You receive monthly payments for as long as you live in the home.

Monthly Term Payment

You receive fixed monthly payments for:

• 5 years
• 10 years
• 15 years
• 20 years

Lump Sum

You receive a large amount at closing.

Note: First-year lump sum is usually capped at 60% of the principal limit.

Combined

Part lump sum, part line of credit.

How the Calculator Estimates Your Principal Limit

The principal limit is the total amount available before costs and mortgage payoff.

The tool uses a simplified formula:

• Age-based factor
• Adjusted for expected interest rate
• Capped at about 80% of home value

In real life, HUD uses detailed actuarial tables. This calculator provides a reasonable estimate for planning.

Step-by-Step: How Net Proceeds Are Calculated

Let’s break it down.

Step 1: Determine Maximum Claim Amount

The lower of:

• Home value
• HUD lending cap

Step 2: Estimate Principal Limit

Based on:

• Age
• Expected interest rate
• Home value

Step 3: Subtract Mandatory Obligations

These include:

• Existing mortgage balance
• Closing costs
• Upfront MIP (2% of claim amount)

Step 4: Calculate Net Proceeds

Net Proceeds =
Principal Limit − Obligations

This is the amount available for your chosen payout option.

Understanding the Results Section

The calculator shows:

Maximum Principal Limit

Total potential loan before expenses.

Initial Mortgage Insurance Premium (MIP)

Typically 2% of the claim amount.

Net Proceeds Available

What you can actually use after paying obligations.

Line of Credit (if selected)

Initial amount available.

Estimated Credit Line Growth (Year 1)

Shows how unused funds may grow.

Estimated Monthly Payment

If tenure or term option is selected.

Lump Sum Amount

If lump sum option is selected.

Non-Borrowing Spouse Warning

Important if spouse is under 62.

Simple Example

Let’s say:

• Age: 72
• Home value: $400,000
• Interest rate: 5.5%
• Existing mortgage: $100,000
• Closing costs: $8,000

The calculator may estimate:

• Principal limit: ~$240,000
• Upfront MIP: ~$8,000
• Total obligations: ~$116,000
• Net proceeds: ~$124,000

That $124,000 can then be structured as:

• Line of credit
• Monthly payments
• Lump sum
• Or combined

Why the Calculator Is Useful

A reverse mortgage is a major financial decision.

This calculator helps you:

• See realistic numbers
• Compare payout options
• Understand the impact of interest rates
• Plan around an existing mortgage
• Evaluate spouse considerations

It gives clarity before speaking with a lender.

Important Disclaimer

This tool provides estimates only.

A reverse mortgage requires:

• HUD-approved counseling
• Financial assessment
• Property appraisal
• Lender underwriting

Final loan terms may differ.

Is a Reverse Mortgage Right for You?

It depends on:

• Your retirement income
• Long-term housing plans
• Health outlook
• Desire to leave the home to heirs
• Comfort with growing loan balance

For some homeowners, it provides freedom and stability. For others, it may not fit long-term goals.

The key is understanding the numbers first. That’s where a Reverse Mortgage Proceeds Calculator becomes valuable.