To begin, please start by changing the Reverse Mortgage Calculator inputs. A chart showing loan balance by year will automatically appear.

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Disclaimer: Estimates are meant to be illustrative and used for reference purposes only. No representation, guarantee or warranty of any kind is made regarding the completeness or accuracy of information provided. No legal, tax, financial or accounting advice provided.

A reverse mortgage allows homeowners aged 62 or older to borrow against the equity in their homes without making monthly loan payments. Instead, repayment is deferred until the homeowner sells the property, moves out permanently, or passes away. This type of loan provides cash to homeowners to supplement their retirement income while allowing them to retain ownership and live in their home.

No, loan advances from a reverse mortgage are not taxable income. Because a reverse mortgage is considered a loan rather than income, the funds received are tax-free. However, it’s always wise to consult a tax professional for specific guidance on your situation.

A Home Equity Conversion Mortgage (HECM) is a federally insured reverse mortgage offered through FHA-approved lenders. It’s the most common type of reverse mortgage, regulated by the U.S. Department of Housing and Urban Development (HUD). HECMs come with government-backed protections designed to safeguard borrowers, such as mandatory counseling and non-recourse loan terms.

Reverse mortgages typically include fees similar to traditional home loans, such as appraisal fees, origination fees, title insurance, mortgage insurance premiums, and closing costs. These expenses usually total between 2% and 6% of the home’s appraised value, depending on the lender and specific loan terms.

The maximum amount you can borrow with a reverse mortgage primarily depends on your age, the home’s appraised value, current interest rates, and the FHA’s lending limits. Typically, the older you are and the more valuable your home, the greater the amount you may borrow.

For a reverse mortgage, your home’s value is determined through an appraisal conducted by an FHA-approved appraiser. The appraisal assesses your home’s current market value and condition, which directly influences the amount you can borrow. Occasionally, a second appraisal may be required if there’s significant uncertainty about the property’s value.

Yes, reverse mortgage proceeds can generally be used for any purpose you choose, such as supplementing retirement income, paying medical bills, renovating your home, or even taking vacations. There are no specific restrictions imposed by lenders regarding how you spend the loan proceeds.

Reverse mortgage proceeds can be received through various payout options, including a lump sum payment, monthly installments (either for a fixed period or for as long as you live in your home), a line of credit, or a combination of these methods. This flexibility allows you to tailor the loan to your financial needs and preferences.

After the borrower passes away, the reverse mortgage becomes due. Typically, heirs will either repay the loan balance by refinancing or selling the home. Any remaining equity after repaying the loan goes to the heirs. If the loan balance exceeds the home’s value, heirs are not responsible for the shortfall due to the non-recourse nature of reverse mortgages.

Reverse mortgages are non-recourse loans, meaning if your home sells for less than the outstanding loan balance, neither you nor your heirs are responsible for paying the difference. Instead, the FHA insurance associated with a HECM reverse mortgage covers the loss, protecting your estate and heirs from any financial liability.

Risks of a reverse mortgage include reduced inheritance for heirs, high fees and closing costs, accruing interest increasing the loan balance, and potential foreclosure if you fail to maintain your home, pay property taxes, or keep up homeowner’s insurance. Thoroughly understanding these risks and speaking with a financial advisor can help you determine if a reverse mortgage aligns with your financial goals.

Benefits of a reverse mortgage include access to tax-free funds to support retirement, no monthly mortgage payments, flexibility in how loan proceeds are used, and the ability to stay in your home for as long as you live, provided you meet loan obligations. This option can significantly enhance financial security and quality of life during retirement.

Interest on a reverse mortgage generally isn’t deductible until it’s actually paid. Unlike a traditional mortgage, reverse mortgage interest accrues and isn’t typically paid by the homeowner during their lifetime, making immediate tax deductions uncommon. However, if payments toward the reverse mortgage interest are made—such as when the loan is repaid—those payments may become tax deductible, provided the loan proceeds were used to buy, build, or substantially improve your primary home. Always consult your tax advisor for guidance tailored to your situation.

You don’t pay traditional Private Mortgage Insurance (PMI) on a reverse mortgage, but you do pay a similar expense called Mortgage Insurance Premium (MIP), specifically for federally insured Home Equity Conversion Mortgages (HECMs). MIP protects the lender and ensures you’ll receive your reverse mortgage proceeds, even if the lender experiences financial difficulties. Typically, this involves an upfront premium at closing plus ongoing annual premiums built into your loan balance.

Your heirs aren’t personally liable for any reverse mortgage debt if you pass away, regardless of when the payout occurred or how much was drawn. A reverse mortgage is a non-recourse loan, meaning your estate or heirs will never owe more than the home’s value when the loan becomes due. If your home sells for less than the loan balance after your death, the lender is limited to collecting proceeds from the sale of your home. Your heirs won’t have to pay the difference.

When using a reverse mortgage calculator, you’ll typically need to assume the lump sum or monthly payment amounts you want, an estimated interest rate, loan duration, and your home’s current appraised value. Being realistic with your inputs ensures you receive an accurate estimate of potential loan amounts and future balances.