Once you’ve added all your loan details, the calculator will provide your estimated lump-sum payout amount.
A reverse mortgage is a home loan that provides senior homeowners with income by drawing from their available home equity. Rather than making a payment each month (as you would on a “forward” mortgage), you’d receive funds from your lender in the form of a lump sum, monthly payout or line of credit.
Learn more about how much home equity is needed for a reverse mortgage.
Senior homeowners ages 62 and older can use a reverse mortgage to meet any financial goal they choose. It’s common to use the funds as income to maintain one’s lifestyle, get out of debt or cover home improvement expenses.
If you don’t own your home outright, some of your available equity may go toward paying off your outstanding forward mortgage balance before you receive any reverse mortgage income.
Learn more about other home improvement loan options and top lenders.
It’s important to be on the lookout for reverse mortgage scams. A scam can involve coercion into the loan by a relative, caregiver or someone selling a “can’t miss” investment opportunity, according to the Consumer Financial Protection Bureau (CFPB).
Be at least 62 years old
Have zero delinquencies on any federal debt
Own your home free and clear or have at least 50% equity
Participate in reverse mortgage counseling
Use the home securing the loan as your primary residence
Meet the FHA’s rules, which apply to both you as a borrower and your property
Learn more about reverse mortgage rules.Unlike a traditional mortgage, you don’t repay a reverse mortgage with monthly payments. Instead, you must pay off the reverse mortgage loan when you move out of the home or when you die. In many cases, selling the home repays the loan.
| Pros | Cons |
|---|---|
Access to cash to help you manage expenses during retirement. You won’t have monthly mortgage payments. You may be able to stay in your home longer. You don’t have to pay taxes on the money you receive. | Generally more expensive than other home loans. Unlike a traditional loan, your mortgage balance goes up, not down. You’ll need to repay the loan if you decide to move. You must pay an upfront and an annual mortgage insurance premium. |
The interest on a reverse mortgage generally isn’t tax-deductible, since it’s considered interest on home equity debt.
If you don’t have enough equity to qualify for a reverse mortgage, there are other options that will allow you to convert your home equity into cash: a cash-out refinance, a home equity line of credit, or a home equity loan.
A cash-out refinance replaces your current mortgage with a new, larger loan. You’ll receive any funds over and above your current mortgage balance as a cash payout. Just like with a reverse mortgage, you can use the money for any purpose.
Use a cash-out refinance calculator to find out how much cash you could get from refinancing your home.A HELOC works a lot like a credit card, but the funds you borrow are secured by your home equity. You can use, pay off and reuse the credit line as many times as you like during the draw period. Once the HELOC draw period ends, you’ll repay the loan in monthly installments. HELOC rates can be quite competitive, but they’re typically variable rather than fixed — this means that your payments may increase over time.
A home equity loan is another option that provides a lump sum of cash secured by your home equity. Home equity loan rates are usually a bit higher than cash-out refinance or HELOC rates, but you’ll leave your purchase mortgage untouched and enjoy stable, consistent payments each month.
Use a home equity calculator to estimate how much you could borrow from your home with a home equity loan or HELOC.There are three main types of reverse mortgages:
A reverse mortgage might make sense if you need to supplement your income and plan to age in place (in your home). It also works well if you can comfortably keep up with your homeowners insurance, property taxes and routine maintenance. However, failure to stay current with these responsibilities can cause big problems. In some cases, you may face monetary penalties, while in other cases the lapse may trigger foreclosure.
There are several reverse mortgage costs, that could include, but aren’t limited to:
The IRS doesn’t consider reverse mortgage payments as taxable income.
Interest on a reverse mortgage is calculated daily and added to your loan balance monthly. You can find your interest charges on your monthly mortgage statement.
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