Analyze your home equity conversion options with our professional-grade HECM calculator. Get real-time projections for loan amounts, interest accrual, and repayment scenarios.
Calculate Your Reverse Mortgage
$100,000 - $5,000,000
62 - 100 years
$0 - $2,000,000
1% - 10%
2026 HECM Limits: For 2026, the FHA HECM lending limit is $1,089,300 for most areas. High-cost area limits may reach $1,633,950.
Your Reverse Mortgage Analysis
Maximum Loan Amount Available
$0
Based on your home value, age, and current 2026 lending limits
Estimated Initial Proceeds
$0
After paying off existing mortgage and closing costs
Projected Loan Balance in 10 Years
$0
With interest accruing at your selected rate
Home Equity Allocation
Understanding Reverse Mortgages in 2026
A reverse mortgage, specifically a Home Equity Conversion Mortgage (HECM), is a federally insured loan for homeowners aged 62 and older that allows you to convert a portion of your home equity into cash while you continue to live in and own your home. Unlike traditional mortgages, you don't make monthly payments. Instead, the loan balance grows over time and is repaid when you permanently leave the home.
2026 Market Insight: With projected stabilization of interest rates and continued high home equity values, 2026 presents a strategic opportunity for reverse mortgages as part of comprehensive retirement planning.
How Reverse Mortgage Calculations Work
The amount you can borrow with a reverse mortgage is determined by several key factors regulated by the Federal Housing Administration (FHA):
Principal Limit Formula:
Principal Limit = (Home Value × Principal Limit Factor) - Mandatory Obligations
Where Principal Limit Factor (PLF) is determined by the youngest borrower's age and expected interest rate.
Example Calculation for 2026:
For a 72-year-old with a $500,000 home (no existing mortgage) at a 5.5% expected rate:
Principal Limit Factor (PLF) for age 72 at 5.5%: ≈ 0.54
Maximum Claim Amount (capped at 2026 limit): $500,000
Principal Limit: $500,000 × 0.54 = $270,000
After 3% closing costs ($15,000): Net Proceeds = $255,000
Real-World Use Cases for 2026
Eliminating Mortgage Payments
Use reverse mortgage proceeds to pay off an existing forward mortgage, freeing up monthly cash flow for retirement expenses. This strategy works well for homeowners with limited retirement income but significant home equity.
Creating a Standby Line of Credit
Establish a HECM line of credit early in retirement. The unused portion grows at a predetermined rate, creating a larger safety net for future needs like healthcare expenses or market downturns.
Portfolio Protection Strategy
Use reverse mortgage funds for living expenses during market downturns to avoid selling investments at a loss. This "sequence of returns risk" mitigation can preserve retirement portfolios by 15-30%.
Aging in Place Modifications
Access tax-free funds to make home modifications (ramps, bathroom upgrades, stairlifts) without monthly payments, allowing seniors to stay in their homes safely and comfortably.
The Reverse Mortgage Formula Explained
The core calculation involves several components regulated by the FHA:
Maximum Claim Amount: The lesser of your home value or the 2026 HECM lending limit ($1,089,300 for most areas)
Principal Limit Factor (PLF): A percentage based on age and expected rate (higher for older borrowers/lower rates)
Principal Limit: Maximum loan amount before costs (MCA × PLF)
Initial Proceeds: Funds available after paying mandatory obligations (existing mortgage, closing costs)
Where Monthly Rate = Annual Rate ÷ 12, and interest compounds monthly with no payments made.
Important Considerations for 2026
Reverse mortgages have significant costs including upfront Mortgage Insurance Premium (2% of home value), origination fees, and ongoing MIP (0.5% annually). You must maintain the home as your primary residence, pay property taxes and insurance, and maintain the property. The loan becomes due when the last borrower permanently leaves the home.
Frequently Asked Questions (2026 Update)
Who qualifies for a reverse mortgage in 2026?
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To qualify for a HECM reverse mortgage in 2026, you must be at least 62 years old, own your home outright or have significant equity (typically 50%+), live in it as your primary residence, participate in mandatory HUD-approved counseling, and demonstrate financial capacity to pay property taxes and insurance. The home must be a single-family home, 2-4 unit property, or approved condominium.
What are the current 2026 reverse mortgage lending limits?
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For 2026, the FHA HECM lending limit is projected to be $1,089,300 for single-family homes in most areas. High-cost areas may have higher limits up to $1,633,950. These limits determine the maximum home value used in reverse mortgage calculations. Homes valued above these limits still qualify, but only the limit amount is used in the calculation.
How does interest accrue on a reverse mortgage?
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Interest on reverse mortgages compounds monthly on the outstanding loan balance. The interest rate typically consists of a fixed or adjustable index rate (like LIBOR or SOFR) plus a lender's margin (usually 2-3%). Unlike traditional loans, you don't make monthly payments, so interest accumulates and is added to the loan balance each month. This means your debt grows over time while your home equity decreases.
Can I outlive a reverse mortgage?
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No, you cannot outlive a HECM reverse mortgage. As long as you live in the home as your primary residence, maintain the property, and pay property taxes and insurance, the loan does not become due regardless of how long you live. The loan is only due when the last borrower permanently leaves the home through sale, moving, or passing away. This is a key protection of federally-insured HECM loans.
What happens to my heirs with a reverse mortgage?
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Heirs inherit the home subject to the reverse mortgage. They have several options: 1) Repay the loan (through refinancing or other funds) and keep the home, 2) Sell the home and receive any remaining equity after loan repayment, or 3) Deed the home to the lender if the balance exceeds the home value. The loan is non-recourse, meaning they never owe more than the home's value at repayment time (95% of appraised value).
Are reverse mortgage proceeds taxable?
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Reverse mortgage proceeds are generally not considered taxable income since they're loan advances, not earned income. However, consult a tax professional as laws vary by jurisdiction and your specific financial situation. While the proceeds themselves are typically tax-free, the interest that accrues on the loan is not tax-deductible until the loan is actually paid (unlike traditional mortgage interest).
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