How a reverse mortgage balance grows
The amount owed on a HECM rises every month without any payment from you, and the tables show how quickly, then compare it with 95 % of the home's appraised value.
Loan balance after 20 years
$510,885
$342,312 of interest and $28,574 of MIP added, with no payment.
| Effective yearly growth | 6.69 % |
| Years to double | 10.7 |
| Interest | $342,312 |
| Mortgage insurance | $28,574 |
| Year | Balance | Of which interest + MIP |
|---|---|---|
| 1 | $149,361 | $9,361 |
| 3 | $170,003 | $30,003 |
| 5 | $193,498 | $53,498 |
| 10 | $267,440 | $127,440 |
| 15 | $369,636 | $229,636 |
| 20 | $510,885 | $370,885 |
| 25 | $706,110 | $566,110 |
| 30 | $975,935 | $835,935 |
Worked out by Radif Partners · How we calculate · factors read on hud.gov · not a loan offer
A HECM balance grows every month by the interest at the note rate and the 0.5 % annual mortgage insurance premium (MIP), both added to what you owe, and the growth compounds because next month's charges apply to this month's total. At a note rate of 5.99 % (1-year Treasury at 4.49 % plus an example margin of 1.5 %), the balance rises by 6.69 % a year and doubles in about 10.7 years. $100,000 borrowed today becomes $191,028 after 10 years, of which $84,015 is interest and $7,013 MIP, and $364,918 after 20. For a 66-year-old who takes the first-year maximum on a $300,000 home, the balance of $64,260 at closing would pass 95 % of today's appraised value in year 24 if the home's value stayed flat. Heirs never owe more than that 95 % figure.
Two charges added every month
The regulation describes the mechanics in a few lines. At the end of each month, "interest accrued during that month shall be added to the outstanding loan balance", and the monthly MIP, which accrues from closing, is added from the second month on (24 CFR 206.25(i)). Repayment of the whole balance is deferred until the loan becomes due and payable, under every payment plan (206.19(g)). The balance at any date is therefore everything paid to you or for you, the financed closing costs included, plus all the interest and premium charged on them since. HUD's payment plan form defines line 27, the outstanding balance, the same way (HUD payment plan form).
Each month the balance is multiplied by 1 + (note rate + 0.5 %) ÷ 12. At 5.99 %, that is 0.5408 % a month, 6.69 % over a year once compounded. The table follows one $100,000 advance with nothing added.
| Year | Balance | Interest so far | MIP so far | Multiple of the sum |
|---|---|---|---|---|
| 1 | $106,687 | $6,171 | $515 | 1.07 × |
| 3 | $121,431 | $19,780 | $1,651 | 1.21 × |
| 5 | $138,213 | $35,269 | $2,944 | 1.38 × |
| 10 | $191,028 | $84,015 | $7,013 | 1.91 × |
| 15 | $264,026 | $151,389 | $12,637 | 2.64 × |
| 20 | $364,918 | $244,508 | $20,410 | 3.65 × |
| 25 | $504,364 | $373,211 | $31,153 | 5.04 × |
| 30 | $697,097 | $551,095 | $46,001 | 6.97 × |
The premium is the smaller part. Over 30 years it adds $46,001 to the $100,000, against $551,095 of interest, because the 0.5 % rate is only 8 % of the combined growth rate. Both are charged on a total that already includes past charges, which is why the curve steepens late: the last five years add more than the first fifteen.
Follow a sum of your own
Loan balance after 12 years
$141,329
| Effective yearly growth | 6.69 % |
| Years to double | 10.7 |
| Interest | $70,448 |
| Mortgage insurance | $5,880 |
What else lands on the balance
Cash is not the only thing that raises what you owe. Monthly tenure or term payments each join the balance on the day they are paid and start their own compounding. When a life expectancy set-aside pays property taxes or insurance, those are payments made for you, and HUD's form counts in the balance every payment made "to or on behalf of the borrower", from the date it is made. Money still sitting in the set-aside is not yet owed and is not yet charged interest. Money left in a line of credit, by contrast, costs nothing until drawn.
The timing of a draw matters as much as its size. $100,000 taken at closing has grown to $191,028 ten years later; the same $100,000 taken in year five has had only five years to compound and stands at $138,213 at that date. A borrower who draws only when a need arises carries a smaller balance than one who takes everything on day one, for the same total of cash received.
Years to double at other note rates
The note rate of an adjustable HECM is the 1-year Treasury index plus the lender's margin, reset on the adjustment dates within the caps of 24 CFR 206.21. One point more or less changes the doubling time by more than a year, as the table shows for the same $100,000.
| Note rate | Yearly growth | Years to double | After 15 years |
|---|---|---|---|
| 4.99 % | 5.63 % | 12.7 | $227,419 |
| 5.99 % | 6.69 % | 10.7 | $264,026 |
| 6.99 % | 7.75 % | 9.3 | $306,488 |
| 7.99 % | 8.83 % | 8.2 | $355,735 |
A whole loan, year by year, against 95 % of today's value
A 66-year-old with a $300,000 home and no mortgage has a principal limit of $107,100. Taking the first-year maximum at closing means $53,260 in cash plus $11,000 of financed upfront MIP and origination fee: the balance starts at $64,260. The rest of the principal limit remains as a line of credit and grows at the same pace.
The fifth column below is not a forecast. It holds the home at its appraised value of today, $300,000, to show when the balance would catch up with 95 % of it, the figure that matters when the loan ends. We make no assumption on future prices: if the home is worth more at that date, the 95 % figure rises with it; if it is worth less, the figure falls.
| Year | Age | Balance | Unused credit line | 95 % of today's value | Settles the loan |
|---|---|---|---|---|---|
| 1 | 67 | $68,557 | $45,705 | $285,000 | $68,557 |
| 5 | 71 | $88,816 | $59,210 | $285,000 | $88,816 |
| 10 | 76 | $122,755 | $81,837 | $285,000 | $122,755 |
| 15 | 81 | $169,663 | $113,109 | $285,000 | $169,663 |
| 20 | 86 | $234,496 | $156,331 | $285,000 | $234,496 |
| 25 | 91 | $324,104 | $216,070 | $285,000 | $285,000 |
| 30 | 96 | $447,954 | $298,636 | $285,000 | $285,000 |
In year 24, at age 90, the balance of $303,791 passes $285,000. From then on, under 24 CFR 206.125, heirs who want to keep the home can settle the loan for 95 % of the appraised value at that time, and a sale for at least that amount closes the debt. The gap above that figure is covered by FHA insurance, not by the family.
Compare a balance with 95 % of a value
Amount that settles the loan
$285,000
| Loan balance | $324,000 |
| 95 % of the appraised value | $285,000 |
| Equity left to heirs if sold at value | $15,000 |
What the borrower never owes
A HECM is non-recourse. The mortgage must state that "the borrower shall have no personal liability for payment of the outstanding loan balance", that the lender can enforce the debt "only through sale of the property" and that no deficiency judgment is allowed (24 CFR 206.27(b)(8); 24 CFR part 206). Whatever the balance reaches, the home is the only thing it can be collected from, and neither the borrower nor the heirs owe the gap.
The balance also stops rising only when the loan is repaid. Nothing caps it at the home's value along the way, and an untouched line of credit adds nothing to it until you draw. The line of credit page follows the unused part, the heirs page explains the 95 % rule step by step, and the mortgage insurance page puts the premium in dollars.