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Enter the borrower and mortgage information. Start by inputting your youngest co-borrower’s age (if applicable), property type, estimated home value, outstanding mortgage balance and ZIP code.
Choose how the property will be used. You’ll also need to select the property use — this should be “primary residence” in order to meet reverse mortgage requirements.
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.
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.
A reverse mortgage must be repaid in full when you move out of the home or when you die. In many cases, selling the home repays the loan.
Alternatives to a reverse mortgage
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.
Cash-out refinance
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.
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.
Home equity loan
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.
Home equity conversion mortgage (HECM): This is the only reverse mortgage backed by the Federal Housing Administration (FHA).
Proprietary reverse mortgage: Private lenders offer proprietary reverse mortgages, which often cater to homeowners with high-priced homes.
Single-purpose reverse mortgage: These loans typically have income limitations and are usually provided by local or state governments and nonprofit organizations.
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.