A reverse mortgage line of credit opened at 70
How large a HECM credit line is at 70, how it grows if left alone until 85 or 90, and how it compares with a loan taken out later on the same home.
Cash you can use in the first 12 months
$58,480
Then $46,320 more after month 12, growing at 6.49 % a year while unused.
| Factor at age 70, 6.625 % | 0.386 |
| Maximum claim amount | $300,000 |
| Principal limit (line 1) | $115,800 |
| Upfront MIP, 2 % (line 3) | $6,000 |
| Origination fee | $5,000 |
| Other closing costs | $0 |
| Mortgage paid off (line 5) | $0 |
| Mandatory obligations (line 10) | $11,000 |
| First-year limit (line 21) | $69,480 |
| Net principal limit (line 25) | $104,800 |
Expected rate 6.65 % (10-year Treasury + margin), read as 6.625 % in HUD's table. Estimate, not a loan offer.
| Year | Age | Loan balance | Unused credit line |
|---|---|---|---|
| 1 | 71 | $11,736 | $111,808 |
| 2 | 72 | $12,520 | $119,284 |
| 3 | 73 | $13,357 | $127,260 |
| 5 | 75 | $15,203 | $144,847 |
| 10 | 80 | $21,013 | $200,198 |
| 15 | 85 | $29,043 | $276,699 |
| 20 | 90 | $40,141 | $382,434 |
| 25 | 95 | $55,480 | $528,574 |
| 30 | 100 | $76,681 | $730,557 |
Worked out by Radif Partners · How we calculate · factors read on hud.gov · not a loan offer
At 70, a HECM on a $300,000 home opens a line of credit of $104,800 after $6,000 of upfront mortgage insurance and a $5,000 origination fee: HUD's factor is 0.386 at an expected rate of 6.65 %, giving a principal limit of $115,800. Up to $58,480 can be drawn in the first 12 months, the rest after. The unused part grows each month at the note rate plus 0.5 % of annual premium, 5.99 % + 0.5 % today. Left alone, it reaches about $200,198 at 80, $276,699 at 85 and $382,434 at 90 if the note rate stays where it is. For comparison, a new HECM taken out at 85 on the same $300,000 home would give $146,500. That growth is room to borrow, not money earned, and it ends when the loan becomes due.
The line at closing: $104,800 on $300,000
A 70-year-old with a $300,000 home and no mortgage starts from a principal limit of $115,800: the home value times HUD's factor of 0.386. The upfront mortgage insurance premium (MIP) of 2 %, $6,000, and the origination fee, $5,000, are financed, so they become the opening balance. What is left, $104,800, is the line of credit.
The first-year rule splits that line in two. Up to $58,480 can be drawn in the first 12 months, which is 60 % of the principal limit minus the costs paid at closing; the other $46,320 opens in month 13. Nothing has to be drawn: a borrower can leave the whole line untouched and still pay only the interest and premium on the $11,000 financed. The first-year limit page has the rule in full.
The same line at 75, 80, 85 and 90
HUD's rules make the principal limit grow each month by one twelfth of the note rate plus the annual premium (HUD Handbook 4000.1). The unused line is the principal limit minus the balance, so it grows too. At an initial note rate of 5.99 % (the 1-year Treasury at 4.49 % plus an example margin of 1.5 %), the yearly growth is about 6.69 %:
| Age | Unused line | Loan balance | Principal limit |
|---|---|---|---|
| 71 | $111,808 | $11,736 | $123,543 |
| 75 | $144,847 | $15,203 | $160,051 |
| 80 | $200,198 | $21,013 | $221,211 |
| 85 | $276,699 | $29,043 | $305,742 |
| 90 | $382,434 | $40,141 | $422,575 |
In 15 years the line more than doubles, and the balance grows too, from the $11,000 of financed costs to $29,043. At 90 the unused line, $382,434, is above today's home value. The line does not depend on what the home is worth later: a HECM is non-recourse, and the line keeps its size whether the market rises or falls.
Your line at 70
Cash you can use in the first 12 months
$58,480
| Factor at age 70, 6.625 % | 0.386 |
| Maximum claim amount | $300,000 |
| Principal limit (line 1) | $115,800 |
| Upfront MIP, 2 % (line 3) | $6,000 |
Opening at 70 or taking a loan at 85
An older borrower gets a larger factor, so waiting has a pull of its own. On the same $300,000 home at today's rates, a HECM taken out at 85 would offer $146,500 after costs, and one at 90 would offer $168,400. The line opened at 70 and left alone reaches $276,699 and $382,434 at those ages.
The comparison rests on two assumptions worth stating. It holds the note rate at today's level for 20 years, and it holds the home at $300,000: a later loan would be sized on the later appraisal, up to the limit of that year. It also ignores the interest and premium that the early line costs on its financed balance, $29,043 by 85 in the table. Those are the trade-offs, not a recommendation either way.
How much the note rate changes the line
On an adjustable HECM the note rate follows its index, here the 1-year Treasury, so the growth of the line is not fixed at closing. The same $104,800 line after 15 years, untouched, at three note rates held constant:
| Note rate | Yearly growth with MIP | Line at 85 |
|---|---|---|
| 4.99 % | 5.63 % | $238,335 |
| 5.99 % | 6.69 % | $276,699 |
| 6.99 % | 7.75 % | $321,199 |
Higher rates make the line grow faster and the balance on anything drawn grow faster too. The rates page explains the indexes, and the line of credit calculator grows any amount.
Grow the line at another note rate
Credit line after 10 years, unused
$200,198
| After 1 year | $111,808 |
| After 5 years | $144,847 |
| After 15 years | $276,699 |
| After 20 years | $382,434 |
Using the line years later
A line opened at 70 is meant to be drawn at some point, and the regulation sets how. A request for a line of credit payment is answered within five business days of the lender receiving it in writing (24 CFR 206.27). After the first year, any amount can be drawn as long as it does not exceed the principal limit minus the balance and any set-asides (24 CFR 206.26). The same section allows a switch from the line to monthly payments, with a fee capped by HUD.
The line also has limits that a growth table hides. It stops when the loan becomes due, whether at the death of the last borrower, a sale, or a move out of the home. It does not pass to a spouse who is not on the loan: under the deferral rules for an eligible non-borrowing spouse, no disbursement is allowed after the borrower's death. And it is not savings: the growth is room to borrow more, with interest and premium charged on every dollar once drawn.
Drawing the first-year maximum instead
A borrower who takes the $58,480 allowed in year one at closing starts with a larger balance and a smaller line. The unused part still grows: $88,484 at 80 and $122,297 at 85, while the balance reaches $132,726 and $183,445. Each dollar left in the line grows at the same rate as each dollar owed.
A fixed-rate HECM has no growing line at all. It pays a single lump sum at closing, $58,480 on this home at a fixed rate of 6.65 %, and the rest of the principal limit can never be drawn. The lump sum page covers that choice.