How much you can get from a reverse mortgage generally works out to roughly 40 to 75 percent of your home’s value, with the exact figure driven by the age of the youngest borrower, the appraised value of the home (capped at $1,249,125 for 2026), and the expected interest rate.1U.S. Department of Housing and Urban Development (HUD). HUD FHA Announces 2026 Loan Limits That percentage is the gross “principal limit.” Before any money reaches you, the loan pays off your existing mortgage and covers upfront costs, and federal rules cap how much of what remains you can draw in the first 12 months.
The Three Inputs That Set Your Ceiling
A Home Equity Conversion Mortgage (HECM), the FHA-insured reverse mortgage, calculates your gross proceeds from three variables.
Age of the Youngest Borrower
Older borrowers qualify for a larger share of their equity. FHA uses actuarial tables to estimate how long the loan will stay outstanding; a shorter projected timeframe means less interest will accrue, so the lender can release more up front. If a non-borrowing spouse is listed on the loan, the calculation uses their age when they are younger, which can meaningfully cut the initial payout.2eCFR. 24 CFR 206.55 – Deferral of Due and Payable Status for Eligible Non-Borrowing Spouses
Home Value, With a Ceiling
Federal regulations define the “maximum claim amount” as the lesser of the appraised value or the national HECM limit.3eCFR. 24 CFR 206.3 – Definitions For case numbers assigned in 2026, that national limit is $1,249,125.1U.S. Department of Housing and Urban Development (HUD). HUD FHA Announces 2026 Loan Limits A home appraised at $1.5 million is treated as if it’s worth $1,249,125. A home appraised at $500,000 uses the full $500,000.
Expected Interest Rate
The expected interest rate is HUD’s projection of how quickly the loan balance will grow. When the rate is low, projected growth is slower and FHA allows a larger initial payout. When the rate is high, the formula shrinks the available proceeds. Even a quarter-point change can shift your available funds by several percentage points of your home’s value.
How the Principal Limit Is Calculated
FHA publishes a table of “principal limit factors,” decimal values tied to age and expected rate. The lender multiplies the applicable factor by your maximum claim amount to get your gross principal limit. Higher ages and lower rates produce higher factors.
At a 5 percent expected rate:
- Age 70 has a factor of roughly 0.576, or about 57.6 percent of the maximum claim amount.
- Age 75 has a factor of roughly 0.614, or about 61.4 percent.
- Age 80 has a factor of roughly 0.657, or about 65.7 percent.
A 75-year-old with a home appraised at $400,000 and an expected rate of 5 percent has a principal limit of about $245,600 ($400,000 × 0.614). An 80-year-old with the same home starts at roughly $262,800, about $17,000 more from the age difference alone.
Raise the rate to 5.5 percent for that same 75-year-old and the factor drops to about 0.553, shrinking the principal limit to roughly $221,200. Two borrowers with identical homes can qualify for very different amounts because of the interplay between age and rates.
What Comes Out Before You See a Dollar
The principal limit is not the amount that lands in your account. Several deductions come off the top.
Existing Mortgage or Other Liens
A reverse mortgage must sit in first-lien position, so the loan first pays off any existing mortgage or other outstanding lien.4Consumer Financial Protection Bureau. CFPB Reverse Mortgage Examination Procedures Servicing A $100,000 balance on a conventional mortgage comes straight off your proceeds. Large existing balances can eat up most of the principal limit.
Upfront Mortgage Insurance Premium
FHA charges an upfront mortgage insurance premium of 2 percent of the maximum claim amount. On a $400,000 home that’s $8,000. The premium funds the non-recourse guarantee, meaning neither you nor your heirs will ever owe more than the home is worth when the loan is repaid. It is normally financed into the loan rather than paid out of pocket. A separate annual MIP of 0.5 percent of the outstanding balance accrues each year and adds to what you owe over time.
Origination Fee
Lenders may charge an origination fee equal to 2 percent of the first $200,000 of the maximum claim amount plus 1 percent of any amount above $200,000, with a floor of $2,500 and a ceiling of $6,000.5eCFR. 24 CFR 206.31 – Allowable Charges and Fees On a $400,000 maximum claim amount the fee is $6,000. Some lenders advertise reduced or waived origination fees, though the cost is sometimes offset elsewhere in the loan terms.
Third-Party Closing Costs and Counseling
Appraisal fees, title insurance, recording fees, and other closing costs typically add several thousand dollars, and they vary by location and property type. HUD-approved counseling is required before you apply.6Consumer Financial Protection Bureau. Can Anyone Take Out a Reverse Mortgage Loan The counseling agency may charge a fee but must waive or reduce it for borrowers who can’t afford it, and the fee can be paid from loan proceeds at closing.7U.S. Department of Housing and Urban Development (HUD). Handbook 7610.1 – HUD Housing Counseling Handbook
A Full Example
Back to the 75-year-old with a $400,000 home and a $245,600 principal limit. A rough breakdown of deductions:
- Upfront MIP at 2 percent: $8,000.
- Origination fee: up to $6,000.
- Closing costs: roughly $3,000 to $5,000.
With no existing mortgage, usable proceeds land near $226,000 to $228,000. If the borrower still owes $80,000 on a conventional mortgage, that also comes off, dropping net proceeds to roughly $146,000 to $148,000.
The 60 Percent First-Year Draw Limit
Even after the deductions above, HUD generally limits what you can access in the first 12 months to 60 percent of the principal limit. If your principal limit is $245,600, the most you can withdraw in the first year is $147,360. The remaining funds become available at the start of year two.
There is one exception. If your mandatory obligations, such as an existing mortgage payoff, closing costs, and any required set-aside, exceed that 60 percent threshold, you can draw enough to cover those obligations plus an additional 10 percent of the principal limit. The rule is designed to slow down equity spend-down, and it can be frustrating for borrowers who need a large sum right away.
When a Set-Aside Reduces What You Can Use
Before approving the loan, the lender runs a “financial assessment” of your credit, income, and property-charge payment history to gauge whether you can keep up with taxes and insurance after closing.8U.S. Department of Housing and Urban Development (HUD). HECM Financial Assessment and Property Charge Guide
If the assessment turns up late property-tax payments in the prior 24 months, insufficient income, or other risk factors, the lender may require a Life Expectancy Set-Aside (LESA). A LESA carves out a portion of your principal limit and reserves it exclusively for future property-tax and insurance payments, which the servicer then pays on your behalf.9U.S. Department of Housing and Urban Development (HUD). HECM Financial Assessment and Property Charge Guide It can be fully funded (covering your entire projected obligation for your life expectancy) or partially funded for middle-risk borrowers. Either way, the set-aside directly reduces the cash available to you. When property taxes exceed 10 percent of gross income, HUD considers default risk elevated, and a set-aside becomes more likely. For a homeowner with high property taxes, a fully funded LESA can consume a substantial share of the principal limit.
How You Receive the Money
Your net proceeds don’t have to arrive all at once. Fixed-rate HECMs require a single lump-sum draw, while adjustable-rate HECMs offer several structures, and you can combine them.
Lump Sum
You take the full available amount (subject to the 60 percent first-year cap) at closing. This suits borrowers who need to pay off a large existing mortgage or fund a specific expense. With a fixed rate, the lump sum is your only option, and the total may be smaller than what an adjustable-rate loan could produce over time.
Tenure Payments
Equal monthly payments continue as long as you live in the home as your primary residence. Payments are guaranteed for life regardless of how much the loan balance grows, which is the most predictable option for long-term budgeting. The monthly amount is typically smaller than a term option would produce.
Term Payments
Fixed monthly amounts run for a set number of years you choose. Because the money is spread over a defined period rather than a lifetime, the monthly payment is larger than a tenure payment. Once the term ends, payments stop, but you can keep living in the home without repaying the loan. Some borrowers use this to bridge a gap before Social Security or a pension starts.
Line of Credit
You draw funds as needed rather than receiving a set payment. This is the most popular option, largely because the unused portion of the credit line grows over time at the same rate as the loan’s interest and insurance charges. A borrower who waits several years to tap the line may find significantly more available than the original principal limit suggested. The growth is an increase in borrowing capacity, not investment earnings, but the practical effect is more accessible funds later.
Combination Plans
You can blend options. A partial lump sum might pay off an existing mortgage while a small tenure payment covers everyday expenses and the remainder sits in a line of credit for emergencies. The ability to restructure the payout after closing is one advantage of adjustable-rate HECMs.
How a Non-Borrowing Spouse Changes the Math
If one spouse is under 62 and can’t be a co-borrower, HUD allows the older spouse to list the younger partner as an “eligible non-borrowing spouse.” That designation lets the younger spouse remain in the home after the borrower dies without the loan being called due, provided specific conditions are met.2eCFR. 24 CFR 206.55 – Deferral of Due and Payable Status for Eligible Non-Borrowing Spouses
Because the calculation uses the age of the younger non-borrowing spouse, including one at origination reduces the initial principal limit. Couples weigh lower upfront proceeds against the housing security it buys for the younger partner. During any future deferral period, the surviving spouse can’t receive new loan advances, so a line of credit or monthly payments would stop, though repayment is not required as long as the spouse meets the ongoing conditions.
Putting the Numbers Together
To estimate what you can actually get, work through the calculation in order. Start with the lesser of your appraised value or $1,249,125. Multiply by the principal limit factor for the youngest borrower’s age at the current expected interest rate. Subtract the upfront MIP (2 percent of the maximum claim amount), the origination fee (up to $6,000), closing costs, any required LESA, and the full payoff of any existing mortgage. What remains is your net available proceeds, of which no more than 60 percent (or your mandatory obligations plus 10 percent, whichever is greater) can be drawn in the first 12 months.
Two borrowers with identical homes routinely end up with very different results, because every input except the home value can move. The single most useful step before applying is asking a lender to run the calculation with your actual age, appraisal estimate, and today’s expected rate, then to itemize every deduction that will come out before you see a dollar.