Break-Even Calculator

What Is a Break-Even Analysis?

A break-even analysis answers a simple but important question: How long do I need to stay in my home before the money I receive from a reverse mortgage exceeds the upfront costs I paid to get it?

Every reverse mortgage comes with closing costs — origination fees, the upfront mortgage insurance premium (MIP), title insurance, appraisal fees, and other charges. These costs are typically rolled into the loan balance, meaning you do not pay them out of pocket, but they still reduce your net benefit. The break-even point is the month when the total cash you have received equals those initial costs.

If you plan to stay in your home for many years beyond the break-even point, a reverse mortgage can be a very cost-effective way to access your home equity. If your planned stay is shorter than the break-even period, you may want to explore other options or reconsider the timing.

Factors That Affect Your Break-Even Point

Several variables determine how quickly you recoup your upfront costs:

Closing Costs

Higher closing costs push the break-even point further into the future. Closing costs on a HECM reverse mortgage typically range from $8,000 to $25,000 or more, depending on your home value, your lender's fees, and where you live. The origination fee alone can be up to $6,000, and the upfront MIP is 2% of the appraised value (or the HECM limit, whichever is lower). Shopping around for competitive closing costs can meaningfully shorten your break-even timeline.

Interest Rate

The interest rate determines how fast your loan balance grows. A lower rate means your balance accumulates more slowly, which can improve your overall financial picture. Even a small difference — say 6% versus 7% — compounds over time and can shift your break-even point by months or even years. Fixed-rate and adjustable-rate HECMs have different rate structures, so compare both options with your lender.

Monthly Benefit Amount

The more you draw each month, the faster you recoup your upfront costs — but each draw also adds to the loan balance that accrues interest. Larger monthly draws reach the break-even point sooner in dollar terms, while smaller draws stretch out the timeline. The right amount depends on your actual monthly needs and overall financial plan.

How Long You Stay

This is the most important factor. A reverse mortgage is designed for homeowners who plan to age in place. If you expect to move within a few years, the upfront costs may not be justified. Borrowers who stay 10 or more years typically see strong net benefits from their reverse mortgage.

When a Reverse Mortgage Makes Financial Sense

There is no universal rule, but financial advisors often suggest that a reverse mortgage is most cost-effective when:

• You plan to stay at least 5 to 7 years beyond the break-even point, giving you a meaningful window of net benefit.
• You have significant home equity and limited liquid savings, making your home your primary financial resource in retirement.
• You need to eliminate a monthly mortgage payment — even before reaching the break-even point, the cash-flow relief of not making mortgage payments can be substantial.
• You want a financial safety net — a line of credit that grows over time provides increasing flexibility, and the growth feature alone can justify the upfront costs over a long horizon.

Conversely, if you expect to sell your home within 2 to 3 years, or if the break-even point exceeds your planned stay by a wide margin, you may want to consider alternatives such as a home equity loan, HELOC, or downsizing.

Related Resources

• Costs & Fees — Origination fees, MIP, servicing costs, and what to expect at closing
• Loan Proceeds Calculator — Estimate how much you could receive from a HECM
• Home Equity Calculator — See how much equity you have built up
• Find a HUD Counselor — Required before applying for any HECM reverse mortgage
• Reverse Mortgage Basics — Start here if you are new to reverse mortgages