A reverse mortgage at 85, paid by the month

Why HUD counts 180 months at 85

A HECM (Home Equity Conversion Mortgage, the FHA-insured reverse mortgage) with an adjustable rate can pay you a fixed amount each month instead of a lump sum or a credit line. Tenure is the version that lasts as long as you live in the home. To size it, HUD treats the loan as if it ran until the youngest borrower turned 100: the month count is 12 × (100 − age), the same horizon the HUD Handbook 4000.1 uses for the remaining term of a tenure loan. At 85 that is 15 years, or 180 months. From age 95, the count stops shrinking and stays at 60 months, a floor set by 24 CFR part 206.

The payment is the amount that would use up the net principal limit over those months, at the expected rate plus the 0.5 % annual mortgage insurance premium (MIP), with each payment made at the start of a month. For our 85-year-old, the expected rate is 6.65 %: the 10-year Treasury rate (CMT) of 5.15 % plus an example margin of 1.5 %. Spread over 180 months, $116,800 gives about $1,053 a month, or $12,640 a year.

The expected rate enters twice, and the two effects pull against each other: a higher rate picks a lower factor in HUD's table, but each dollar left then buys a larger monthly amount. One point higher, at 7.65 %, and the same home pays about $1,036 a month; one point lower, about $1,069. At 85 the gap is small. The rate is fixed when the loan is sized. Afterwards the note rate of an adjustable HECM moves with the index, which changes how fast the balance grows but not the amount of each payment.

Tenure next to fixed terms of 5, 8 and 10 years

A term plan pays equal monthly amounts for a number of months you choose, then stops. It is computed with the same formula, only the month count changes. The first-year limit does not bind here: twelve payments stay under the $66,400 the rule allows in year one even for the shortest term, so every plan below pays its full amount from the start.

A five-year term more than doubles the monthly amount. That suits a need with an end date, such as bridging the years until another income starts. The payment for life is the one that does not run out. Both can be combined with a credit line kept aside, which HUD calls modified tenure and modified term.

A 15-year term pays the same as tenure

At 85, a term of 15 years and the tenure plan count the same 180 months, so the formula gives the same payment to the cent. The two part ways only at 100. A term borrower who reaches that age stops receiving money. A tenure borrower keeps getting $1,053 a month for as long as the loan is not due and the payments stay within the maximum amount stated in the mortgage, as the handbook words it. The plan chosen is recorded on lines 29 and 30 of the HUD payment plan form. That extra time is the reason to choose tenure at this age when the amounts are equal.

The balance under each plan

Each payment is added to the balance, and so are the interest and the annual MIP on everything already paid. With the note rate held at 5.99 %, the tenure balance reaches $194,869 at 95 and $343,762 at 100. The ten-year term, larger each month but shorter, ends at 95 with $245,991, and from then on only interest and MIP add to it.

The last column is the principal limit, which grows at the same monthly rate. By design, a tenure balance catches up with it near 100. A balance above the home's value is not a debt for you or your heirs: the loan is non-recourse, and the heirs page explains the 95 % rule that applies when it ends.

Close to the top of the factor table

HUD's principal limit factor (PLF) table keeps rising with age, but it flattens near the end (HUD factor table). In the 6.625 % column, the factor is 0.525 at 85, 0.598 at 90, 0.685 at 95 and 0.701 at 99, the last row. No cell of the whole table goes above 0.750. An 85-year-old already gets about 75 % of the most this column allows at any age.

Waiting a few years therefore adds less from the factor than from the month count: the payment climbs fast after 90 because the horizon shrinks, not because the factor does. The monthly payments page covers the formula for every age, and the age rules page explains how HUD rounds your age.