Reverse Mortgage Calculator
Using a reverse mortgage calculator can help you estimate your possible loan amount and show various payout options. A reverse mortgage lets homeowners who are 62 and older convert home equity into cash.
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By Zachary Romeo, CBCA
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Zachary Romeo, CBCA
Head of Loans and Banking at MoneyGeek
Zachary Romeo is a certified Commercial Banking and Credit Analyst (CBCA), and the Head of Loans and Banking at MoneyGeek. Previously, he led production teams for some of the largest online informational resources in higher education, with over 13 years of experience in editorial production. Romeo has a bachelor's degree in biological engineering from Cornell University. He geeks out on minimizing personal debt and helping others do the same through people-first content.
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Reviewed by Ramsey Coulter
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Credit & Mortgage Expert
Ramsey Coulter has worked in the mortgage and credit industry for over 10 years. Currently a mortgage loan originator with CMG Home Loans, he specializes in helping first-time homebuyers navigate the mortgage process. Coulter is also a certified credit counselor at [Coulter Credit LLC](https://coultercredit.com/credit-repair-services/) and has been retained as an expert witness in numerous legal cases concerning credit and mortgage-related matters. His responsibilities as an expert include preparing detailed reports, participating in depositions and crafting rebuttal reports to counter opposing expert witness testimonies. Coulter holds a bachelor of science degree from West Chester University of Pennsylvania.
Edited by Jonathan RamosJonathan Ramos is an editor committed to producing user-friendly and accessible financial content, particularly for those in younger generations. Previously, he worked as a fact-checker at The Daily Emerald, the University of Oregon newspaper. Jonathan's interest in the personal finance space stems from his desire to make a positive impact on the lives of others — he helps people make informed financial decisions by using his editing skills to make complex information more digestible.
ZC
By Zachary Romeo, CBCA
ZC
Zachary Romeo, CBCA
Head of Loans and Banking at MoneyGeek
Zachary Romeo is a certified Commercial Banking and Credit Analyst (CBCA), and the Head of Loans and Banking at MoneyGeek. Previously, he led production teams for some of the largest online informational resources in higher education, with over 13 years of experience in editorial production. Romeo has a bachelor's degree in biological engineering from Cornell University. He geeks out on minimizing personal debt and helping others do the same through people-first content.
RC
Reviewed by Ramsey Coulter
RC
Credit & Mortgage Expert
Ramsey Coulter has worked in the mortgage and credit industry for over 10 years. Currently a mortgage loan originator with CMG Home Loans, he specializes in helping first-time homebuyers navigate the mortgage process. Coulter is also a certified credit counselor at [Coulter Credit LLC](https://coultercredit.com/credit-repair-services/) and has been retained as an expert witness in numerous legal cases concerning credit and mortgage-related matters. His responsibilities as an expert include preparing detailed reports, participating in depositions and crafting rebuttal reports to counter opposing expert witness testimonies. Coulter holds a bachelor of science degree from West Chester University of Pennsylvania.
Edited by Jonathan RamosJonathan Ramos is an editor committed to producing user-friendly and accessible financial content, particularly for those in younger generations. Previously, he worked as a fact-checker at The Daily Emerald, the University of Oregon newspaper. Jonathan's interest in the personal finance space stems from his desire to make a positive impact on the lives of others — he helps people make informed financial decisions by using his editing skills to make complex information more digestible.
Updated: August 21, 2024
Curious about your home's equity? Explore with our reverse mortgage calculator.
Using a reverse mortgage calculator is an effective way to estimate how much you can borrow against your home equity. While a typical mortgage requires monthly payments to build equity, a reverse mortgage lets you convert part of your home's value into cash. Understanding this process allows you to plan for your financial future and ensure you maximize your benefits.
MoneyGeek's reverse mortgage calculator can help you understand the potential loan amount. Let's dive into the information you need to provide and what the results mean.
WHAT TO INPUTHome Value
This figure helps determine the maximum loan amount you can receive. Lenders use your home's current market value to calculate the equity available for a reverse mortgage.
Existing Mortgage Balance
If you have an outstanding mortgage, it must be paid off with the reverse mortgage proceeds. This balance affects the net amount you can borrow.
Expected Interest Rate
The interest rate affects the total loan cost and how quickly your home equity decreases. A lower rate means slower equity reduction and potentially larger loan amounts.
Age of the Youngest (Or Only) Borrower
Lenders use this to estimate the loan's duration. Older borrowers typically receive larger amounts because of the shorter expected loan term.
WHAT OUTPUT MEANSLump Sum
This option provides a single, large upfront payment. It's ideal for homeowners who require immediate access to substantial funds, such as for home renovations or debt consolidation.
Line of Credit
This type of credit offers flexibility by allowing you to draw funds as needed up to a certain limit. It's ideal for those who want access to funds over time for unforeseen expenses.
Monthly Payments for Life
Provides a steady income stream for as long as you reside in your home, making it ideal for supplementing retirement income and meeting ongoing living expenses.
Deciding on a reverse mortgage is a significant step. Let’s explore several scenarios to help you determine when a reverse mortgage aligns with your financial goals and lifestyle. Knowing when it makes sense — and when it doesn’t — will help you be more strategic.
Linda is a 70-year-old retired school teacher living in the suburbs of a mid-sized city. She now enjoys her retirement, keeping herself occupied with gardening, book club meetings and her grandchildren. Linda wants to maintain her lifestyle without compromising her independence, but her savings are dwindling.
Linda owns her home outright and is assuming tapping into its equity to supplement her pension and social security. Having a monthly income stream to cover her expenses, from health care to home maintenance, without the burden of monthly repayments leads her to consider a reverse mortgage.
IS A REVERSE MORTGAGE THE ANSWER?A reverse mortgage with monthly income payments is the best option for Linda because she needs a steady income stream to sustain her lifestyle in retirement. Owning her home outright presents an opportunity, allowing Linda to access its equity as supplemental income, covering essential expenses without monthly loan repayments.
Robert, a 65-year-old widower, recently retired from a long career in civil engineering. He spends his days working on intricate woodworking projects and volunteering at the local maritime museum. His home, filled with memories and personal projects, is a place he deeply cherishes.
Unexpected medical bills and the desire to financially assist his grandchildren with their college education have led him to explore ways to leverage his home's equity. He would also like to leave his home to his children as part of his legacy. That makes him hesitant about a solution that would significantly eat into the home's equity over time and require his children to pay off a debt to keep their home.
IS A REVERSE MORTGAGE THE ANSWER?In Robert's case, a reverse mortgage might not align with his dual goals. Given his desire to support current expenses and leave a legacy, a home equity loan or a home equity line of credit (HELOC) could be a more fitting solution. These allow Robert to access the funds needed for his immediate financial needs without compromising his ability to leave his home to his children.
Jasmine, a 68-year-old former music teacher and a local choir director, still fills her days with music and community service in her small town. She’s deeply attached to her home, which has been in her family for generations. It also serves as a community gathering spot for local music events.
Jasmine wants to convert part of her home into a small community music studio. She is considering a reverse mortgage to finance this project. However, Jasmine is also wary of diminishing her home’s equity; she wants to leave a substantial legacy to her children.
IS A REVERSE MORTGAGE THE ANSWER?While a reverse mortgage offers an immediate equity tap without monthly repayments, she should consider other financing options to preserve her home’s legacy for her children. Personal loans provide straightforward repayment plans and lower interest rates than credit cards for highly qualified borrowers. If she can secure a grant from a local community organization, she can also keep all the equity in her home without having to take on new debt.
Here are some immediate steps you might consider taking after calculating your potential reverse mortgage:
Consult a HUD-approved counselor
Speak with a Department of Housing and Urban Development (HUD)-approved reverse mortgage counselor to get a comprehensive understanding of the reverse mortgage process. They can help you evaluate your options and discuss any financial implications. You can find a list of HUD-approved counseling agencies on the HUD website.
Prepare your documentation
Start gathering necessary documents, such as proof of age (like a government-issued ID), proof of residence, documentation of income, your home's title and recent property tax statements. Details about your existing mortgage and any homeowners association (HOA) fees can also be useful.
Assess your financial situation
Consider how the reverse mortgage fits into your long-term financial plan, particularly with estate planning and any plans to leave assets to heirs. Understand how your preferred payment option fits with your budget.
Discuss your plans with your family
If you intend to leave your home to your heirs, it's advisable to discuss your reverse mortgage plans with them as it may impact their inheritance by depleting home equity.
Comparing a reverse mortgage and a HELOC can help homeowners choose the right option. Both let you access home equity, but while a reverse mortgage provides income without repayments, a HELOC requires monthly payments. Knowing these differences can lead to more informed choices. Explore our comparison table for more insights.
