Considering converting home equity into cash? Use this aarp reverse mortgage calculator inspired tool to estimate your eligibility and potential net proceeds from a Home Equity Conversion Mortgage (HECM).
Reverse Mortgage Calculator
*Estimated HECM calculation
AARP Reverse Mortgage Calculator Formula
The estimated borrowing power (Principal Limit) is determined by the age of the youngest borrower, the home’s value (up to the HECM limit), and current interest rates:
Net Proceeds are calculated by subtracting your existing mortgage balance and estimated closing costs from the Principal Limit.
Variables
- PLF: Principal Limit Factor (based on age and interest rate).
- HECM Limit: The maximum claim amount (approx $1,149,825 in 2024).
- Existing Lien: Your current mortgage balance that must be paid off.
Related Calculators
- HECM for Purchase Calculator
- Retirement Income Calculator
- Home Equity Loan Calculator
- Senior Housing Affordability
What is AARP Reverse Mortgage Calculator?
Users searching for an aarp reverse mortgage calculator are typically looking for a trustworthy, non-salesy tool to understand how much equity they can access. AARP provides educational resources on reverse mortgages (HECMs), helping seniors age 62+ understand the pros and cons.
This calculator simulates that experience by providing a conservative estimate of your net proceeds—the cash available to you after paying off your existing mortgage and closing costs—without requiring personal contact information.
How to Calculate AARP Reverse Mortgage (Example)
Example: Age 72, Home Value $400,000, Current Mortgage $50,000.
- Determine PLF: At age 72 with current rates (approx 7%), the factor is roughly 0.40 (40%).
- Gross Principal Limit: $400,000 × 0.40 = $160,000.
- Subtract Mandatory Payoff: $160,000 – $50,000 (Existing Mortgage) = $110,000.
- Subtract Closing Costs: Est. $10,000 (Fees/Insurance).
- Net Proceeds: $110,000 – $10,000 = $100,000 available cash.
Frequently Asked Questions (FAQ)
You must be at least 62 years old. If you have a spouse who is younger than 62, they can be an “eligible non-borrowing spouse,” but the loan amount will be based on the younger age, reducing the proceeds.
No. You retain the title to your home. You are required to continue paying property taxes, homeowners insurance, and maintenance costs. The loan is repaid when you move out, sell the home, or pass away.
AARP itself does not issue loans. They provide information, guides, and calculators to help members make informed decisions. They often recommend HUD-approved housing counseling before applying.
Generally, no. Reverse mortgage proceeds are considered loan advances, not income, so they are typically tax-free and usually do not affect Social Security or Medicare benefits (though they may affect Medicaid).