FHA HECM Reverse Mortgage Calculator
A Home Equity Conversion Mortgage (HECM) is the federally insured reverse mortgage program administered by the US Department of Housing and Urban Development (HUD) and backed by the Federal Housing Administration (FHA). It allows homeowners aged 62 and older to convert a portion of their home equity into loan proceeds without making monthly mortgage payments, as long as the home remains the borrower's primary residence, property taxes and insurance are kept current, and the property is maintained. The amount available, called the principal limit, depends on the youngest borrower's age (or that of a non-borrowing eligible spouse), the current expected interest rate, and the lesser of the appraised value, the sales price, or the 2025 HECM lending limit of $1,209,750. Older borrowers and lower interest rates increase the principal limit. Upfront costs include a 2% FHA mortgage insurance premium on the first $200,000 and 0.01% on the remainder, plus origination fees and third-party closing costs. An ongoing annual MIP of 0.5% of the outstanding loan balance is also charged. Proceeds can be taken as a lump sum, a monthly tenure payment for life, a line of credit, or a combination. This calculator estimates the principal limit factor, the available proceeds after upfront costs, and the monthly tenure payment for a borrower of your age and home value using current published HECM parameters.
At age 72 with a home value of $600,000.00, you may be eligible for $197,940.00 in net proceeds.
How the HECM calculation works
A HECM reverses the traditional mortgage: instead of paying the lender, the lender pays you. The amount depends on your age, home value, and the expected interest rate. Here is the calculation sequence:
MCA = min(appraised value, $1,209,750)
PLF = interpolated based on age and EIR (HUD tables)
GPL = MCA x PLF
upfront MIP = MCA x 2%
origination fee = max($2,500, min(2% of $200k + 1% of remainder, $6,000))
net PLF = GPL - upfront MIP
available before payoff = net PLF - origination fee - closing costs
net available = available - existing mortgage payoff
tenure payment = net available / life expectancy months (SSA tables)
Worked example
Home $600,000, age 72, mortgage $50,000, EIR 6%, closing $4,000:
- MCA = min(600,000, 1,209,750) = $600,000
- PLF at age 72, EIR 6% = approximately 0.43 (interpolated)
- GPL = 600,000 x 0.43 = $258,000
- Upfront MIP = 600,000 x 0.02 = $12,000
- Origination fee = $2,500 (minimum)
- Total costs = $12,000 + $2,500 + $4,000 = $18,500
- Net available = $258,000 - $18,500 - $50,000 = $189,500
- Tenure payment (80 year life expectancy = 240 months) = $189,500 / 240 = approximately $789/month
Key considerations for HECM borrowers
A HECM is complex and requires careful consideration. You must be at least 62 years old and the home must be your primary residence. You must keep property taxes, insurance, and homeowners association fees current. If you fail to maintain the property or let taxes lapse, the lender can foreclose. The loan balance grows with interest, and you are responsible for all growth.
HECM counselling is mandatory and typically costs $125 to $150. Find a HUD-approved counselor at hud.gov. This calculator uses simplified Principal Limit Factor interpolation; actual PLFs are published monthly by HUD and vary by expected interest rate. Consult an official HECM counselor for exact figures.
The main benefits of a HECM are: (1) no monthly payments, (2) you retain home ownership, (3) proceeds are tax-free, and (4) it is FHA insured (protects you if the lender fails). The main risks are: (1) rising loan balance from accrued interest, (2) potential impact on means-tested benefits like Medicaid, and (3) complex fee structure.
The expected-rate trap and the first-year 60% cap
The single biggest misunderstanding with a HECM is the "expected interest rate." It is not the rate you pay on the balance; it is a separately set long-term rate (tied to the 10-year index) that HUD feeds into its Principal Limit Factor tables. Counter to intuition, a lower expected rate raises your principal limit, so two identical 72-year-olds with the same $600,000 home can qualify for very different amounts depending only on where rates sit the week they lock. This tool interpolates published PLF values, but HUD reissues the exact tables every month, so treat the figure here as a planning estimate, not a quote.
The second trap is the first-year disbursement cap. Federal rules generally limit what you can draw in the first 12 months to 60% of the principal limit, or your mandatory obligations (such as paying off an existing $50,000 mortgage) plus 10% of the principal limit if that is higher. A borrower who assumes the full net proceeds are available immediately can be caught out. The Maximum Claim Amount is also capped at the national HECM limit (currently $1,209,750) no matter how far the appraisal runs above it, so a $2,000,000 home is treated as though it were worth the limit.
Finally, the loan is not due until the last borrower leaves, but property taxes, hazard insurance and upkeep stay the borrower's responsibility. A lapse there, not the growing balance, is the most common trigger for foreclosure.
FHA HECM calculator: frequently asked questions
What is an FHA HECM reverse mortgage?
A Home Equity Conversion Mortgage (HECM) is an FHA-insured reverse mortgage for homeowners age 62 and older. It allows you to convert part of your home equity into cash without selling your home or making monthly payments. Instead, the loan balance grows over time and is repaid (usually from home sale proceeds) when you move, sell, or pass away. HUD provides official guidance at hud.gov.
What is the 2025 FHA HECM loan limit?
The 2025 HECM loan limit is $1,209,750 (same as the high-cost conforming mortgage limit). This is the maximum amount of home value that can be used to calculate your principal limit. If your home is appraised higher than the limit, only the limit amount is used. Source: HUD Press Release (November 2024).
What is the Principal Limit Factor (PLF)?
The Principal Limit Factor is a percentage that determines how much of your home's value you can borrow. It depends on your age (older is better) and the expected interest rate. For example, at age 72 with a 6% expected rate, your PLF might be 0.45, meaning you can borrow up to 45% of your home's value. At age 80 with the same rate, the PLF increases to approximately 0.52 (52%). HUD publishes exact PLF tables monthly.
What are the costs of a HECM?
HECM costs include: upfront mortgage insurance premium (2% of the Maximum Claim Amount), annual mortgage insurance premium (0.5% of the outstanding balance), origination fee ($2,500 or 2% of the first $200,000 + 1%, up to $6,000 max), and third-party closing costs (appraisal, title, escrow, typically $3,000 to $5,000). These reduce the net cash available to you.
Do I need to pay back a HECM immediately?
No. A HECM does not require monthly payments. The loan accrues interest monthly and the balance grows over time. You typically repay the loan when you sell your home, move to another residence, or pass away. Your heirs can then settle the loan from the sale proceeds. However, your home must remain your primary residence, and you must keep property taxes and insurance current.
What is the difference between a lump sum and a tenure payment?
A lump sum gives you all available proceeds in one payment. A tenure payment (annuity) spreads the available proceeds over your life expectancy, giving you a fixed monthly payment. The tenure payment uses actuarial life tables to estimate your life expectancy, and the monthly amount is calculated by dividing available proceeds by remaining life expectancy in months. A lump sum is typically larger upfront but tenure provides structured income.
Official sources
- HUD: Home Equity Conversion Mortgage (HECM) Program.
- HUD: 2025 HECM Loan Limits (updated November 2024).
- HUD: Find a HECM Counselor (mandatory before closing).
Reviewed by the CalculatorHub team, edited by James Graham, 13 June 2026. See our methodology. General information, not financial advice. This calculator uses simplified PLF interpolation; consult HUD for exact figures.