The lump sum of a fixed-rate HECM
A fixed-rate HECM pays its money once, at closing, and the share of the principal limit left behind on that day can never be drawn: the figures below show how large that share is.
Lump sum at closing (fixed rate)
$78,940
$61,560 of the principal limit can never be drawn on a fixed-rate HECM.
| Factor at age 74, 6.625 % | 0.405 |
| Maximum claim amount | $380,000 |
| Principal limit (line 1) | $153,900 |
| Upfront MIP, 2 % (line 3) | $7,600 |
| Origination fee | $5,800 |
| Other closing costs | $0 |
| Mortgage paid off (line 5) | $0 |
| Mandatory obligations (line 10) | $13,400 |
| First-year limit (line 21) | $92,340 |
| Net principal limit (line 25) | $140,500 |
Expected rate 6.65 % (the fixed note rate), read as 6.625 % in HUD's table. Estimate, not a loan offer.
| Year | Age | Loan balance | Principal limit |
|---|---|---|---|
| 1 | 75 | $99,163 | $165,272 |
| 2 | 76 | $106,490 | $177,484 |
| 3 | 77 | $114,359 | $190,598 |
| 5 | 79 | $131,883 | $219,805 |
| 10 | 84 | $188,360 | $313,934 |
| 15 | 89 | $269,022 | $448,371 |
| 20 | 94 | $384,227 | $640,379 |
| 25 | 99 | $548,767 | $914,611 |
| 30 | 104 | $783,767 | $1,306,279 |
Worked out by Radif Partners · How we calculate · factors read on hud.gov · not a loan offer
A fixed-rate HECM is paid as one single lump sum at closing, with no later draws: the regulation calls it the Single Lump Sum payment option and reserves it for fixed-rate loans. The amount cannot exceed 60 % of the principal limit, or the mandatory obligations plus 10 % of it when obligations pass half, and the costs come out of that ceiling. At 74, with a $380,000 home and an example fixed rate of 6.65 %, the principal limit is $153,900. After $7,600 of upfront mortgage insurance (MIP) and an origination fee of $5,800, the lump sum is $78,940. The other $61,560, 40 % of the principal limit, is never available. An adjustable HECM drawn to its maximum pays the same $78,940 at closing, then opens $61,560 more after 12 months, as a line that grows. Paying off a large mortgage shrinks the loss.
The rule: one advance, at closing
Federal rules list six ways to receive HECM money, and one of them belongs to fixed-rate loans alone. Under 24 CFR 206.19(e), the Single Lump Sum payment option pays the "Borrower's Advance" at closing, "available only for fixed interest rate HECMs". HUD's Handbook adds that the borrower is "limited to a single Disbursement at closing with no opportunity for future Disbursements", apart from a set-aside created that day (Handbook 4000.1).
The ceiling is the same as for the first year of an adjustable loan (24 CFR 206.25(a)(2)): the greater of 60 % of the principal limit or the mandatory obligations plus 10 % of it, but never more than the principal limit minus any taxes-and-insurance set-aside for later years and any servicing fee set-aside. Mandatory obligations are the upfront MIP, the origination fee, other closing costs and any mortgage to pay off. They are paid from the advance, and you receive what is left.
A set-aside for property taxes and insurance shrinks the lump sum further. On a fixed-rate loan it can only be a fully funded one: the charges due in the first 12 months count among the obligations (24 CFR 206.25(b)(12)(ii)), and the amount reserved for later years is taken off the principal limit before the ceiling applies. The set-aside page computes that reserve with HUD's formula.
On a fixed-rate HECM, the expected rate that picks the column of HUD's factor table is the note rate itself (24 CFR 206.3). A lender quoting 6.65 % fixed is read in the 6.625 % column, where the factor at 74 is 0.405.
| Age | Principal limit | Lump sum after costs | Never available | Cash as share of the home |
|---|---|---|---|---|
| 62 | $124,640 | $61,384 | $49,856 | 16 % |
| 66 | $135,660 | $67,996 | $54,264 | 18 % |
| 70 | $146,680 | $74,608 | $58,672 | 20 % |
| 74 | $153,900 | $78,940 | $61,560 | 21 % |
| 78 | $168,340 | $87,604 | $67,336 | 23 % |
| 82 | $184,680 | $97,408 | $73,872 | 26 % |
| 86 | $204,820 | $109,492 | $81,928 | 29 % |
| 90 | $227,240 | $122,944 | $90,896 | 32 % |
Your lump sum at a fixed rate
Lump sum at closing (fixed rate)
$94,444
| Factor at age 81, 6.625 % | 0.473 |
| Maximum claim amount | $380,000 |
| Principal limit (line 1) | $179,740 |
| Upfront MIP, 2 % (line 3) | $7,600 |
How much of the principal limit is given up
With no debt to pay off, the share lost is close to 40 % of the principal limit, because the advance stops at 60 %. While obligations stay under half of the principal limit, the costs do not change the size of the loss; they are paid from inside the 60 %, so the cash in hand falls while the part left behind stays the same. In dollars, the loss rises with age, since older borrowers start from a larger principal limit: $49,856 at 62 and $90,896 at 90 on the same home.
The money left behind is not owed. The balance starts at the advance, $92,340 including the financed costs, and then compounds at 6.65 % plus 0.5 % of annual MIP. After 10 years at that fixed rate it is $188,360, with no payment due while you live in the home.
Against the largest draw on an adjustable loan
An adjustable HECM can pay the same amount on closing day. Drawn to its first-year maximum, it gives $78,940 at closing, and on the first anniversary another $61,560 becomes available as a line of credit. That line compounds at the note rate plus 0.5 % while unused. At today's adjustable note rate of 5.99 %, held constant, it would be $85,084 after five years and $117,597 after ten.
| Year | Fixed: balance | Adjustable: balance | Adjustable: unused line |
|---|---|---|---|
| 1 | $99,163 | $98,514 | $65,676 |
| 3 | $114,359 | $112,129 | $74,753 |
| 5 | $131,883 | $127,626 | $85,084 |
| 10 | $188,360 | $176,396 | $117,597 |
| 15 | $269,022 | $243,801 | $162,534 |
The trade is about what you know in advance. The fixed rate tells you today exactly how the balance will grow; the adjustable rate can move by up to two points a year and five over the life of the loan (24 CFR 206.21), in either direction, and its balance column could end up above or below the one shown. In exchange the adjustable loan keeps $61,560 of borrowing room alive. If you need the whole sum on day one and nothing after, the fixed loan gives the same cash; if a later need is possible, the fixed loan cannot meet it.
The same home, adjustable, maximum draw
Cash you can use in the first 12 months
$78,940
| Factor at age 74, 6.625 % | 0.405 |
| Maximum claim amount | $380,000 |
| Principal limit (line 1) | $153,900 |
| Upfront MIP, 2 % (line 3) | $7,600 |
When a mortgage takes most of the advance
A large existing mortgage changes the picture. Once mandatory obligations pass half of the principal limit, the ceiling becomes the obligations plus 10 % of the principal limit. With a $120,000 mortgage on the same $380,000 home, obligations reach $133,400. The advance can be $148,790: the payoff and costs, then $15,390 in cash. Only $5,110 of the principal limit is left behind, so in this case the fixed rate gives up little. The existing mortgage page shows the full scale of debts.
Paying back part of it
Any HECM can be repaid in full or in part at any time without penalty (24 CFR 206.209). On a fixed-rate loan, though, a partial repayment only lowers the balance: 24 CFR 206.19(h)(3) says the room it frees in the principal limit "shall not be available for the borrower to draw against". The money cannot be taken out again. The loan balance page shows how interest and MIP accumulate on a sum taken at closing, and the line of credit page details the growth of the adjustable alternative.