Reverse Mortgage for Purchase Calculator
Estimate how much you can finance with no mortgage payment using an FHA-insured HECM reverse mortgage. No contact information is required. Select your age and the purchase price of the home using the sliders below, then click 'Next' to continue.
Not purchasing a home? Use our regular HECM reverse mortgage calculator.
For informational purposes only. MyHECM.com is not a mortgage lender or broker. Please get a formal quote from a qualified professional before making a financial decision. This calculator reflects the 1/1/2024 lending limit change. Our content may contain affiliate links through which we may receive compensation at no extra cost to you.
Welcome! You’ve found one of the best (if not the best) reverse mortgage purchase calculators online. Our calculator is updated and current for 2024 based on the latest FHA principal limit and principal limit factor tables. You’ll be able to quickly and easily calculate your down payment for a reverse mortgage purchase.
This calculator is for the FHA-insured home equity conversion mortgage, or HECM. The HECM is the most common reverse mortgage product on the market today. If you know somebody who recently got a reverse mortgage, it’s likely they got a HECM.
You can use this HECM for purchase calculator at no cost to you with no personal information required. We hope you find it helpful as you decide if a reverse mortgage is right for you.
Table of Contents
What is a Reverse Mortgage?
A HECM, or home equity conversion mortgage, is an FHA-insured reverse mortgage program that enables homeowners 62 and older to purchase a home without a mortgage payment.
Congress created the HECM (often pronounced heck-um by industry professionals) as part of the Housing and Community Development Act of 1987. The Act gives the Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA) authority to oversee, regulate, and insure the HECM.
The HECM is by far the most popular reverse mortgage in the United States.
How a Reverse Mortgage for Purchase Works
A reverse mortgage for purchase enables you to finance a home purchase with no mortgage payment. How it works is very simple: the bank finances a portion of the purchase price and the rest plus closing costs is your cash to close.
No mortgage payments are required as long as at least one borrower or non-borrowing spouse lives in the home and pays the required property charges.
A purchase HECM is great for buying a home because it offers increased purchasing power and improved monthly cash flow. It also enables you to keep more money in the bank (instead of spending it buying the home) where it can help protect your retirement lifestyle and financial security.
How much the bank finances depends on your age, the purchase price of the home, and the current rate environment. There’s no set amount that applies to every applicant.
You can use our reverse mortgage purchase calculator to estimate how much the bank will finance based on your eligibility criteria and the current interest rate environment.
How To Use This Reverse Mortgage Purchase Calculator
We think you’ll find our reverse mortgage purchase calculator to be fast and easy to use. Feel free to scan through the instructions below. You’ll learn about what to fill in (and why) as well as key insights about the results once the calculations are complete.
Step 1 – Enter Your Age and the Purchase Price of the Home
The bank will finance a portion of the purchase price based on current interest rates and the age of the youngest borrower (or non-borrowing spouse). Enter the age of the youngest borrower (or non-borrowing spouse) and the purchase price of the home in the fields on this page.
- Age (of youngest borrower) – Enter the age of the youngest borrower (or non-borrowing spouse).
- Purchase price – Enter the price of the home you wish to purchase.
Click the Next button to continue to Step 2 of the reverse mortgage purchase calculator.
Step 2 – Select Your State
Select the state where the property is located. Per HUD/FHA requirements, a HECM reverse mortgage is only for a primary residence that you live in for the majority of the year. No second homes or rental properties are allowed.
- Select your state – Select the state where the property is located.
Click the Next button to continue to Step 3 of the reverse mortgage for purchase calculator.
Step 3 – Confirm and Calculate
This page displays the information you’ve already entered. Confirm the information is accurate, then click the Calculate button. The calculation results will display on the next page.
Step 4 – Calculation Results
The top of the Calculation Results page displays results for the two primary HECM products: the variable-rate HECM and the fixed-rate HECM. You can switch between the two using the drop down box near the top of the page.
Near the bottom of the page, you’ll see an estimate of how much the lender will finance and your estimated cash to close.
Yes, the down payment is much larger than the typical down payment required for a regular “forward” mortgage. Again, the reverse mortgage doesn’t require monthly payments, so it’s more conservative than a regular mortgage.
You’ll notice that many of the key terms on this page are hyperlinked. Click on the links to learn more about important reverse mortgage for purchase topics.
If you’d like to recalculate using different criteria, simply click the Back button to return to Step 3.
Frequently Asked Questions
What is the 95% rule on a reverse mortgage?
The reverse mortgage 95% rule has to do with how much of the loan balance has to be repaid when the reverse mortgage is settled up (usually after the last borrower or non-borrowing spouse passes away). Whether the heirs want to keep the home or sell it, all that has to be repaid is the lesser of the reverse mortgage balance or 95% of the value of the home. If the home isn’t worth enough to pay off the entire balance, FHA covers the shortage.
How does a reverse mortgage purchase work?
How a reverse mortgage purchase works is very simple: the bank finances a portion of the purchase price and the rest plus closing costs is your cash to close. No mortgage payments are required as long as at least one borrower or non-borrowing spouse lives in the home and pays the required property charges. If you’d like to find out how much you can qualify for, check out our HECM for purchase calculator on this page.
What is the 60% rule for reverse mortgage?
The 60% rule works like this: if your mandatory obligations (closing costs, existing mortgages and liens, set-asides, taxes due, etc.) are less than 60% of the reverse mortgage principal limit, you can take up to the difference between the mandatory obligations and 60% of the principal limit at closing and/or during the first twelve months of the loan. If the mandatory obligations are more than 60% of the principal limit, you can take up to 10% of the principal limit or the difference between the mandatory obligations and the principal limit, whichever is less.
